Negotiated Rulemaking for Higher Education 2016 ...
UNITED STATES DEPARTMENT OF EDUCATION
OFFICE OF POSTSECONDARY EDUCATION
PUBLIC HEARING
San Francisco, California
Wednesday, September 16, 2015
Public Hearing, held at the Courtyard
Marriott, 299 2nd Street, Second Floor, San
Francisco, California, beginning at 9:04 a.m. and
ending at 4:00 p.m., on Wednesday, September 16,
2015, before United States Department of Education
Deputy Undersecretary Jeff Appel, reported by Chris
Te Selle, Certified Shorthand Reporter No. 10836.
PAGES 1 - 141
U.S. DEPARTMENT OF EDUCATION STAFF PRESENT:
JEFF APPEL
Deputy Undersecretary
ANNMARIE WEISMAN
Director of the Policy Coordination Group
Policy, Planning and Innovation
Office of Postsecondary Education
JOHN DiPAOLO
Deputy General Counsel
Office of the General Counsel
Present:
Sparky Abraham - HERA
Nick Akers - California Attorney General
Kara Alba - EBCLC East Bay Community Law Center
Mark Anderson - AFT
Dewayne Barnes - California College of the Arts
Nick Campins - California Department of Justice
Katherine Lee Carey - Cooley LLP
Scott Cline - California College of the Arts
Debbie Cochrane - TICAS
Amy Costa - California Department of Finance
Nancy Ann Dooley - FSA
Sanders Fabares
Rachelle Feldman - University of California/HELC
Juliana Fredman - Bay Area Legal Aid
Monica Henestroza - California State Assembly
Present (Cont'd):
Katrina Hess
Kay Lewis - HELC
Dawn Lueck - self/debt collective
George Miller
Abby Norris - Norris Policy Consulting
Angela Perry - Public Advocates
Dexter Rappleye - Public Counsel
Anne Richardson - Public Counsel
Joe Rideout - Consumer Action
Mark Seymoroski - DeVry Education Group
Pete Smith - Center for Responsible Lending
Kelly Suk
Megumi Tsutsui - HERA
Jennifer Webber - self/TICAS
Aaron Washington
ASL Interpreters:
Beth Abdallah
Mary Wisbey
INDEX
OPENING REMARKS PAGE
DIRECTOR ANNMARIE WEISMAN 5
DEPUTY UNDERSECRETARY JEFF APPEL 6
PUBLIC COMMENTS
SPEAKER PAGE
DEBBIE COCHRANE 12
ANNE RICHARDSON 17, 36
DAWN LUECK 23, 59, 90, 106, 115, 122
DEXTER RAPPLEYE 31
NICK CAMPINS 38
JOE RIDEOUT 43
KAY LEWIS 48
MEGUMI TSUTSUI 53
KATRINA HESS 61
SANDERS FABARES 66, 112, 128, 133, 137
LUNCHEON RECESS: 10:54 a.m. to 1:06 p.m. 71
ANGELA PERRY 72
PETER SMITH 77
JULIANA FREDMAN 81
MARK ANDERSON 87
RACHELLE FELDMAN 95
KARA ALBA 101
SPARKY ABRAHAM 117
San Francisco, California, Wednesday, Sept. 16, 2015
9:04 a.m.
TRANSCRIPT OF PUBLIC HEARING
MS. WEISMAN: Good morning. My name is
Annmarie Weisman. I am the Director of the Policy
Coordination Group within Policy, Planning and
Innovation in the Office of Postsecondary Education
with the Department of Education.
I'm pleased to welcome you to this public
hearing and to thank you for your interest in this
very important topic. I'm joined today by two
colleagues. On my far right, and your far left, I'd
like to introduce John DiPaolo, Deputy General
Counsel at the Department of Education, and I would
also like to introduce to you our Deputy
Undersecretary Jeff Appel, who will provide some
brief opening remarks.
I will then provide you with some logistical
information about how the hearing will go, and then
I will open the meeting up to you.
Jeff Appel is the Deputy Undersecretary, who
oversees postsecondary student aid policy
initiatives. Jeff first joined the Department in
2011 as a senior policy adviser for Higher Education
and Student Financial Aid in the Office of Planning,
Evaluation, and Policy Development.
From 2007 to 2011, Jeff worked for Congressman
George Miller, leading numerous student aid and
higher education efforts, including several
significant pieces of legislation.
Jeff also worked as Assistant Director of the
Government Accountability Office, responsible for
managing much of GAO's research concerning student
aid and other postsecondary education issues.
Jeff holds a bachelor's degree in finance from
the University of Arizona, and a master's in applied
economics from Johns Hopkins University.
MR. APPEL: Thank you, Annmarie, and good
morning. Thank you for being here. I'm pleased to
welcome you to this public hearing.
This is the second of two hearings that we are
convening to gather input in preparation for
negotiated rulemaking regarding borrower defense to
repayment of a federal student loan. We also seek
suggestions for additional issues that should be
considered for regulatory action by the negotiating
committee.
College remains the best investment students
can make in their future, and students deserve a
fair and honest value. While many colleges play a
critical role in helping students succeed in their
educational and training pursuits, some of America's
colleges are failing to provide the education and
training promised to advance students' careers.
Rather than providing students with the
opportunity for a solid education that leads to a
good job, some of these institutions have left
students with lots of debt and few job prospects due
to the institution's acts or omissions, putting both
students and taxpayers at risk.
President Obama's Administration is committed
to changing that through actions to hold
institutions accountable for their actions and to
assure Americans are protected from unscrupulous
colleges that deny students meaningful educational
opportunities and leave taxpayers holding the bag.
Current federal law and regulations provide a
defense to repayment, or borrower's defense, that
allows borrowers to seek loan forgiveness if their
schools' actions give rise to a cause of action per
state law.
This provision has rarely been used in the
past. However, we have seen an increase in borrower
defense claims and believe the regulations need to
be further refined.
Over the past six years, the Department of
Education has taken unprecedented actions to
establish federal regulations to prevent misleading
claims by career colleges. We've issued gainful
employment regulations which will help to ensure
that students at career colleges don't end up with
debt they cannot repay.
We've also cracked down on bad actors through
investigations and enforcement. Education Secretary
Arnie Duncan has directed our team to ensure that
students who have been defrauded by their college,
or whose schools have closed down, receive every
penny of the debt relief to which they are entitled
as efficiently and easily as possible.
That need has grown pressing in recent months
because of the wind-down and ultimate collapse of
Corinthian Colleges, Incorporated, which you may
know by the brand names Heald, WyoTech, and Everest,
following enforcement actions by this Administration
and scrutiny by other enforcement entities.
Earlier this year, we announced a series of
steps to support students who attended Corinthian
schools. We are now extending our commitment to
ensuring accountability and to continue working
aggressively toward reforms that ensure that schools
are held responsible for their actions.
We are committed to ensuring that every
student has access to an education that will put
them on solid footing for a career, and we will hold
schools accountable for illegal practices that
undercut their students, and taxpayers, and, where
students have been harmed by fraudulent practices,
we are fully committed to making sure they receive
every penny of relief they are entitled to under
law.
After considering the public comments
submitted, and listening to the hearing testimony
today, the Department will draft a list of topics to
be considered by one or more rulemaking committees.
The negotiators will be asked to work to reach
consensus on which acts or omissions of an
institution of higher education a borrower may
assert as a defense to repayment of a loan made
under the Federal Direct Loan Program, and the
consequences of such borrower defenses for
borrowers, institutions, and the Secretary.
We will also consider the suggestions
received for additional issues that should be
considered for regulatory action by the negotiating
committee. We anticipate that any committee
established after the public hearings will begin
negotiations in January 2016, and a Federal Register
notice seeking nominations for negotiators will be
issued in advance of that date.
Again, thank you for dedicating your time
and expertise to this very important process. We
appreciate your willingness to share your
perspectives, and know we will be better informed
and have a more robust conversation as a result of
today's participation. Thank you.
MS. WEISMAN: A number of people have already
signed up to speak today. We also have a number of
time slots open. Please see Aaron Washington at the
registration table if you would like to sign up for
a time to speak today.
Each speaker is allotted about five minutes.
At the end of five minutes, I will ask you to wrap
up your comments, and, if there is time remaining,
we will take additional comments and allow speakers
to return again, if possible.
Whether you speak or not, you may supply your
comments in writing. Written comments that you
provide to us will also be made public and will be
posted to the website.
If we continue to have open time slots, we may
extend our scheduled breaks, but I will also invite
the audience to speak, if desired.
The hearing will be transcribed. The
transcript will be posted on our website within the
next few weeks. Keep in mind, also, that as this is
a public hearing, members of the public may also be
recording your comments either using audio or video
recording.
I mentioned breaks. We will take a break at
approximately 10:30 to 10:40, we will break for
lunch from 12:00 to 1:00, and we will also have a
short break in the afternoon from 2:30 to 2:40.
A couple of other logistical items: restrooms
are down the hall. If you go out this first door,
take a left, and then an immediate right, and there
will be signs to direct you outside, as well.
If you need other assistance, please, again,
see Aaron Washington at the registration desk, and
he will either assist you or direct you to someone
who can assist you. He also has a WiFi password, if
you need access to WiFi.
When it is your turn to speak, I will call your
name. Please, also, though, state your name and
organization, just to be clear, when you come to the
podium.
We may be taking some speakers a little out of
order, as there are some traffic congestion issues
due to a very large local conference, so, if someone
is not here to speak, we will certainly delay their
time until a little bit later; that may also affect
the schedule just a little bit.
For our first speaker, we have Debbie Cochrane
from TICAS, The Institute for College Access and
Success.
Is Debbie here yet?
DEBBIE COCHRANE: I am. Catch my breath.
MS. WEISMAN: Catch your breath and come up
when you are ready. Thank you.
SPEAKER COMMENTS BY DEBBIE COCHRANE
DEBBIE COCHRANE: Hello. I'm Debbie Cochrane,
with The Institute for College Access and Success,
and I -- excuse me. I'm a little out of breath.
Not only did we have horrible bridge traffic, but we
put the wrong address into the GPS, so, just did a
little exercise for the last couple of blocks.
Anyway, I would like to start by welcoming you
to California. This, of course, is the home of the
vast majority of the students affected by the abrupt
closure of Corinthian Colleges, as well as the vast
majority of the potential beneficiaries of the
expedited process that the Department has set up for
certain Heald students.
In many ways, California is ground zero for
some of the issues that we're here to talk about
today, so I want to share an aspect of that that's
harder, probably, for you to see from D.C. That
aspect is that many of the harmed Corinthian
students are currently unable to get relief, because
they need help, and legal services providers in the
state are tapped out. Legal aid groups across the
state have long waiting lists for former Corinthian
students seeking help, and many are just turning
students away without even putting them on a waiting
list.
Some of the providers are doing what they can
to help Corinthian students, but that means that all
of their other clients, like those facing evictions,
are just being put on the back seat.
So, I want to start by sharing that, because I
think it underscores the importance of making the
process and the rules for borrowers as simple and
straightforward as possible.
It also underscores a need for the Department
to do whatever it can now, under current
regulations, to improve access to relief for the
students who have already been harmed, in addition
to developing improved regulations. Borrowers can't
and shouldn't have to wait to receive the relief
they are already entitled to under the law.
One of the two most meaningful steps the
Department can take to ensure meaningful access to
relief is to make all federal loans eligible for
discharge under current and proposed regulations.
The request for comments, which we are all here
responding, refer to only direct loans, but all
federal loans are eligible for relief.
As we detail in our written comments, which we
will be submitting later today, the Department has
previously and repeatedly made clear that both DL
and FFEL borrowers have borrower defenses, so
denying borrowers relief from FFEL loans would have
a devastating effect and deny students relief they
are entitled to. More than 90 percent of the
federal loans disbursed to Heald students in 2009-10
were FFEL loans.
The second of the two most meaningful steps the
Department can take is to provide automatic group
discharges to students where the Department has
access to documented evidence of fraudulent or
relevant illegal acts. Department rules already
provide for automatic group discharges to certain
borrowers without individual applications.
Since 1999, federal rules have allowed for
closed school discharges without a borrower needing
to apply for them, and for false certification
discharges without an application since 2000.
In explaining the extension of this provision
to false certification discharges, the Department
stated in the Federal Register on August 3, 1989, we
or a guaranty agency occasionally learn of
information that strongly suggests that all
borrowers in a certain category will likely qualify
for a false certification discharge. For example,
we might determine that all students at a specific
school, during a certain time period, have incorrect
ATB determinations. In the interest of assisting
those borrowers, many of whom may be unaware of the
possibility of receiving a loan discharge, the
committee decided that it would be appropriate to
discharge those loans without an individual
discharge request from each borrower.
So, the rationale provided by the Department
for changing the false certification rules and the
closed school rules before it is the same one that
we provide for borrower defenses. When the
Department has documentation that a group of
students has been affected by unlawful school
practices, those affected students, many of whom, as
the Department states, may be unaware of the
possibility of receiving a loan discharge, be able
to receive relief without needing to apply for it.
Importantly, discharge eligibility under both
false certification and closed schools rules can be
and is established for groups of students at a time
already.
Later today, as I mentioned, we'll be
submitting much more detailed comments on these
issues, as well as several others. Among the most
critical of the others is to add to this rulemaking,
updating the current outdated false certification
rules which complement the DTR regs.
We urge the Department to curb the manipulation
of cohort default rates and 90/10 rates, and to
prohibit mandatory arbitration clauses and class
action bans from enrollment agreements.
Also, while we strongly agree with the
Department's goal of strengthening accountability
for schools that defraud students, it's crucial that
such accountability provisions not be designed to
pit students and schools against each other, the
result of which would be to effectively ensure that
students' defenses to repayment are unsuccessful.
Once it's clear to the Department that
borrowers have been defrauded, the relief to which
they're entitled should not be subject to or have to
wait for the legal maneuverings of unscrupulous
schools to conclude.
Thank you.
MS. WEISMAN: Next, we have Anne Richardson,
from Opportunity Under Law.
SPEAKER COMMENTS BY ANNE RICHARDSON
ANNE RICHARDSON: Good morning. My name is
Anne Richardson. I'm the associate director of
Public Counsel's Opportunity Under Law. We provide
pro bono legal services to low income communities,
including students, former foster youth, and many
people who have been affected by the for-profit
colleges.
Thank you for the opportunity to provide
comments regarding the Department's negotiated
rulemaking with respect to borrower defenses to
repayment. We believe this rulemaking is overdue.
For decades, students who have had bona fide
defenses to repayment of their student loan debt
have not been given a process by which to assert
these defenses, students like Aeyla Admire, a client
of ours, who grew up in poverty, the child of a
single mother. She couldn't always afford to pay
the electric bill when she was a child growing up;
her mother could not afford that.
Remembering the times when the electricity
would just shut off, Aeyla told us that although she
desperately wanted to become a mother, she would not
put her kids through what she went through as a
child.
Therefore, she went to Everest College in
Reseda, hoping to pull herself out of poverty, to
someday have a job that pays enough that her own
children would not suffer from financial insecurity.
The recruiter showed her glossy brochures filled
with starting salaries and placement rates that had
nothing to do with reality.
We all know what happened next. Now Aeyla owes
over $17,000 in student loan debt, struggling to
make minimum payments while keeping afloat working
at Cost Plus World Market. Her degree is worthless
to her, and she has not started a family yet.
Aeyla has submitted a request for defense to
repayment. She deserves to have every cent
discharged, having suffered the exact same kind of
misrepresentations that we now know were part of a
calculated scheme at Corinthian to lure in students
through aggressive sales tactics.
In the brief time I have, I will focus on a few
issues, and we will be submitting detailed written
comments, as well, and my colleague, Dexter
Rappleye, will also provide a few more comments.
Number 1, there must be a process for automatic
classwide defenses to repayment to be made in a
cost-effective and administratively efficient manner
in the numerous instances where the Department
becomes aware of a classwide violation of state or
federal law.
Many schools have instituted deceptive
marketing practices that permeate an entire
recruitment process. Such evidence is available to
the Department of Education, whether based on
audits, investigations, student complaints, consumer
advocates, not to mention law enforcement or other
actions against the schools. However, it must not
be dependent upon judicial findings, because public
proceedings that actually end in a determination are
so rare.
Number 2, such relief must be given
automatically. It should not be an opt in process.
Because the Department is collecting on the debt, it
knows which students attended which schools, and it
has their student addresses and contact information.
The discharge provided to certain former Heald
students, by contrast, really is an empty promise to
most students. Even what the Department views as
simple forms that it provided in June for these
students, we are being inundated with students who
are confused about whether the relief applies to
them, how to fill out the forms, whether they can
even download the forms.
And, often, they do not have the documentation
or information requested. There are thousands more
who never even hear about it, so relief must be opt
out, not opt in.
Number 3, arbitration clauses. The Department
of Education we know does not have sufficient
resources to adequately investigate each and every
school to confirm whether they have engaged in
misconduct; neither do the states attorneys general
or the other governmental agencies, but, because so
many of these schools have arbitration clauses,
students are often forced to bring claims, when they
bring them, in secret, one-sided proceedings with
limited discovery.
The Department should follow the lead of
agencies such as the Department of Defense, which
has banned the use of forced arbitration clauses on
credit products that are offered to U.S. service
members.
The Department of Education can similarly limit
participation in its title IV programs to
institutions that do not have mandatory arbitration
clauses and class action waivers in their enrollment
contracts.
Ending forced arbitration clauses and class
action waivers may be the only way to make sure that
schools are not artificially shielded from liability
for years, only to declare bankruptcy, as happened
recently with the collapse of Corinthian.
Other issues that should be on the agenda
include ensuring that there is no statute of
limitations on the defense to repayment; ensuring
that FFEL, Perkins, and consolidated loans are
included in the defense to repayment regulations;
amending the regulations to stop the manipulation of
cohort default rates and 90/10 calculations;
updating the requirements for existing categories of
false certification discharges; reinstating Pell
grant eligibility.
There is a California bill currently on the
governor's desk that would reinstate eligibility for
a similar Pell grant program, and we know that most
of our clients want to continue their education,
once they realize their degree is worthless, but
they are penalized that they cannot access the
grants that were wasted on their prior school.
Next, ensure that any discharge of debt is
nontaxable and that the students' credit scores are
restored; ensure that the standard is based on
federal law, as well as state law, to ease the
administration by the Department of Education and to
ensure fairness to students from all 50 states; and,
finally, to ensure that the procedures for
recovering money by the Department of Education from
the schools does not interfere with a timely relief
for the students.
While the Department should clearly promulgate
rules regarding recruitment of money from the
schools, but the Department should also take pains
to make sure that any such rules do not create any
perverse incentives for schools to take actions that
will hold up on getting students the debt discharges
they are entitled to.
Thank you so much.
MS. WEISMAN: Next, we have Dawn Lueck, from,
organizer with the Debt Collective.
SPEAKER COMMENTS BY DAWN LUECK
DAWN LUECK: Hi, everyone. I'm actually here
to just represent myself. I am -- did somebody
leave their glasses?
You can see me better.
So, I'm the former finance manager for Heald
College. I worked for them 2009 to 2012. I was
with ITT Tech for 10 years, starting in 1999.
I am a student. I attended ITT Tech,
University of Phoenix, also some college here in
college -- doesn't matter -- but I've been in this
industry for a long time.
I'm also a borrower. I have $117,000 in
student loan debt. So, I am here representing the
voiceless, representing the students that are not
being heard. No matter how many times we put them
in front of the Department of Education, their
stories still fall to the wayside.
So, I would like to, at this public hearing, I
would like to comment on the issues that we all, I
mean, in truth, we all are really facing -- it's not
just the Department of Education -- as it relates to
borrower discharge.
I also want to talk about the failed leadership
of the Department of Education and the role of the
suggested committee that they are going to put
together starting early next year.
First off, I would like to say that the
Department of Education really needs to stop with
all the propaganda that they are using to suggest
that they actually have this figured out and are
actually ready to do the right thing for the
students impacted the most by this crisis.
When I look at the language, when I look at the
public announcements that are released, when I read
articles where any member of the Department of
Education is cited, the language is just half-assed
attempts to communicate with the borrowers, but it
doesn't actually communicate with the borrowers.
It's not saying what it actually needs to say.
The Department of Education does not clearly state
things that they need to state and define what they
mean. One example that I'll use is, in a lot of the
announcements, they keep talking about taxpayers are
really important in this process.
Well, I would just like to say that
student borrowers are taxpayers, too, but it kind of
swings the conversation to the general population
reading it, and skipping over the fact that I'm a
taxpayer. I have student loan debt. I'm part of
that category, too. So, I think statements need to
be broader and more clear, especially when it's
going out to the public.
The other concern I have with the language
and the communication with the Department of
Education is their attempts to actually notify
students affected by these issues. We know that,
and my numbers may not be perfect, they could be a
few weeks older, but we know that there's at least
over 4,000 borrower defense claims. We know that
over 40,000 Heald students are eligible, but yet
only 2,000 have actually applied.
In August, the Department of Education
sent out information in PDFs to eligible Heald
students, but didn't take into consideration that
given the economic hardship of these students, most
of them don't have Internet. They don't have
computers. They're using their smartphones to
access applications that can't be accessed.
So, this causes another obstacle that the
students have to face when they are actually
legitimately trying to access the really important
forms and stuff that they need to apply for this
process.
As of August, the Department of Ed has
also received over 7,800 closed school claims. Not
even half of them have been approved yet. Every day
that goes by in these students' lives matter.
As two of the individuals here today have
already mentioned, the stories of the students, it
doesn't get any harsher than what we're seeing.
They are being evicted, they are not able to rent
homes, and this goes beyond just the fact that they
can't even get the jobs that they were promised when
they were in school.
So, as the clock ticks on, the
Department's failure to actually do something that
you guys have the legal authority to do, is just, it
perpetuates this crisis that we're facing.
This committee is great -- thank you guys
for putting this together -- but it doesn't change
the fact that you guys already have the legal
authority to offer classwide discharges. Arnie
Duncan could sign a paper today, and there could be
a lot of discharge that would benefit thousands and
thousands of individuals.
The language, so, the committee, I
believe, for the record, I believe that the
committee really needs to focus on the language that
the Department of Education uses, as we go forward
with this process.
As somebody that's been in financial aid
and higher education for many years, it does get
complicated, and there's a lot of terminology that
could be left to interpretation. And, if you are
not a trained attorney, or a trained financial aid
expert, it leaves a lot of students out of the
conversation and really understanding these high
level processes.
We could change the language, bring it
down to a level where people can actually join in in
the conversations and participate more so that the
students actually understand what decisions are
being made on their behalf. So, again, that's
something the committee should be tasked with.
The Department of Education has just
really been unprepared in handling a process that's
been on the books since, I believe, 1994. And I
just, I mean, I don't even know what to say about
the fact that you guys would even possibly consider
not including all loans.
2010 is not the mark of these issues with
for-profit schools. I've been working for them
since 1999. I've seen the recruiting practices
change. I've seen tuition increase.
I've seen these schools be investigated.
I mean, I'm sitting in my office in Henderson,
Nevada when ITT Tech was investigated, and the units
came in to seize documents. So, you guys cannot put
out there that you guys have not known of what's
been going on. And it dates back far beyond 2014
with the collapse of Corinthian and far beyond 2010.
So, the committee really needs to, I
think, really keep their finger on the pulse with
this as far as how far back you guys are willing to
go when it comes to defense to repayment.
Classwide discharge has already been
brought up this morning. That's an easy. That's a
given. There is no reason why we would
individualize this process and place the burden on
students where, hello, they did not go to law
school. I'm so sorry.
Even some of these processes I read
myself, and it just, I, I mean, it takes a group of
us to sit down and really brainstorm to understand
and then come up with ideas and tactics, so, to
individualize this process and require evidence and
proof is absolutely absurd.
The other thing is, over the years, one of
the ways these for-profit schools has cut costs is
they've expedited the process by using electronic
signatures. Okay, I don't know how many times
students came in, they signed electronically, and
they did not leave with a printout, right?
We're trying to be tree-earth friendly,
and schools weren't necessarily printing documents,
so to place the burden on them that they need to
come up with documentation of proof when you guys
have it, because you guys have been investigating
them, attorney generals have been investigating
them, enough evidence is there. Classwide
discharge.
Even, even in the reports from the BDSM,
he's even stated in his reports that the evidence
should not have to come from the students. So,
that's a sign of hope there. Let's just say hello
to that.
The other thing that I want to speak to
before I finish is, in your guys' public
announcement, you guys suggest that you really want
this committee to be diversified. I want you guys
to define what does diversification look like to you
and this branch of the government, because, in my
experience so far, I haven't seen much diversity
amongst the groups that you guys put together.
Usually, you guys get some powerful
attorneys, probably some representation from these
for-profit schools, but what we are calling for is
to be guaranteed and ensured that students from
these schools will be represented not just on these
little silos of committees that you guys want to
create, but in all committees. Every committee that
is going to influence your decision, the students
must represent themselves.
They must be given the agency to speak on
their own behalf, because, I will say right now, the
Department of Education is not somebody I would
trust, as a student borrower, to speak on my behalf.
I would also not trust a for-profit school
representative to speak on my behalf if I was a
student looking for defense to repayment.
I'll wrap it up. Thank you, guys. Take
care.
MS. WEISMAN: Next, we have Dexter Rappleye,
from Opportunity Under Law.
SPEAKER COMMENTS BY DEXTER RAPPLEYE
DEXTER RAPPLEYE: Thank you for giving me the
chance to comment today. I work with Anne
Richardson, who spoke a moment ago, at Public
Counsel Opportunity Under Law. We are an impact
litigation team whose mission is to identify and
attack root causes of economic inequality and lack
of opportunity.
This was one of the first issues that attracted
our attention. The pattern that we see is typically
the same. Schools advertise to, they locate and
advertise to unsophisticated young people, tell them
that they can get a real career, if they enroll, and
the students wind up a couple of years later working
in the same types of minimum wage jobs they were
doing before, only with tens of thousands of dollars
in loans to pay off.
The students don't realize until well after
they've left school that they were lied to. These
schools' sole function is to continue receiving
federal money, as long as they can continue
convincing students to sign on the dotted line,
which is, honestly, not that hard. It doesn't
matter what happens to the students when they finish
school. There is no accountability, and there is no
justice coming at any point in the process.
The dangers posed by con artists like those in
the for-profit college industry are not new in our
economy. There are effective mechanisms for
combating these practices in most sectors of the
economy.
However, for decades, the legal regime
governing federal student loans has protected these
schools from having to meet even a minimal standard
of accountability, and it is denied students any
opportunity for relief, even in the worst of cases,
even when it is widely acknowledged that their
rights have been violated.
This rulemaking presents an opportunity to
change this trend by finally providing students with
the right to start over, or some remedy. In
addition to laying the groundwork for a fair
approach to student claims going forward, this may
also be our last opportunity to do what we can to
address some of the wrongs of the past.
However, in order to accomplish these goals,
the negotiators must take care to create a process
that is accessible to students and that broadly
confronts the harms that students have suffered.
Here are some of the issues that should be
included in the negotiations to ensure that this
proceeding is effective. First, the process should
address past as well as future wrongs.
The negotiators must ensure that the process
allows students to assert defenses to repayment not
only of Direct loans, but all other types of federal
student loans, including FFEL and consolidation
loans. It would be unfair for students who suffered
the exact same harm to be treated differently simply
because one student borrowed prior to 2010 under the
old FFEL regime, while another borrowed under the
new regime.
The Department has consistently maintained that
students have the same rights to assert defenses to
repayment of FFEL and Direct loans, and the time has
come to clarify those rights and make them
applicable to all federal student loans.
The negotiators should further clarify that
state law statutes of limitations do not bar
students from asserting defenses to repayment.
Thousands of students would have asserted defenses
over the last few decades if a meaningful process
had been available to them. It would be
unacceptable to deny relief to all of those students
because of a statute of limitations when there was
no way for them to assert their defense at the time
of their injuries.
The next point I want to get to is that the
negotiators must consider whether to allow students,
should consider implementing a uniform standard in
addition to using state law as a basis for defenses
to repayment.
The Department's own regulations regarding
misrepresentations to students, as well as the FTC
Act and FTC's regulations and the practice of the
FTC and CFPB in pursuing predatory businesses and
protecting consumers could serve as appropriate
guides to how to formulate a standard for when
students can assert defenses to repayment of their
federal loans.
This standard would relieve the administrative
burden on the Department of having to review state
law claims from students around the country under
the laws of 50 different states, and it would also
ensure a measure of basic fairness, because it would
be inequitable to deny relief to students under a
federal program simply because they live in a state
with weaker consumer protection laws, when the
Department has full authority to manage the student
loan program.
The last thing I'm going to touch on -- there's
a lot of points, but I can't get to all of them --
is that the process should be tailored to provide as
much relief as possible to eligible students, which
means going beyond simply discharging the loans.
The negotiators should consider what steps are
within their power to make students whole, beyond
simply discharging their loans. Most of the
students that we've worked with, most of the
students that we've talked to, to my surprise,
rather than swearing off higher education for good,
which is what I may have done if I had had the
experiences they had, they simply want the same
thing they've always wanted, a chance to open up new
opportunities in their lives through education.
In order to allow them this chance to start
over, the Department should, at a minimum, reinstate
their eligibility to receive Pell grants.
Further, the negotiators should consider what
steps are within the Department's power to
compensate students for the loss of other benefits
that may be necessary for them to pursue education,
such as state benefits, veterans assistance, and
things along those lines.
The existing regulations already clarify that
the Department has the authority to grant further
relief, as it deems necessary, so it's important to
think of what steps can be taken to make students
whole as much as possible.
Thank you very much.
MS. WEISMAN: Next listed to speak is Krystle
Powell. Krystle was a student from Heald College.
Krystle is not available to speak this morning, and
so she has someone who will be speaking on her
behalf.
FURTHER SPEAKER COMMENTS BY ANNE RICHARDSON
ANNE RICHARDSON: It's me again. I'm Anne
Richardson, from Public Counsel Opportunity Under
Law, and one of our clients is named Krystle Powell,
and she was unavailable today because she has
bronchitis, so she asked that we read her statement
for her.
My name is Krystle Powell. I am a 30-year-old
former student of Heald College, San Francisco. I
attended Heald from August 2011 to December 2013.
When I first stepped into Heald College, I was
automatically bombarded with promises of lifetime
job placement, 85 percent graduation rate for my
program, and also a certificate of phlebotomy when I
completed my two year program for medical assistant
applied science degree.
Of course, at that point in my life, I was
ready to believe in people to get to my ultimate
goal of finishing school and starting my career.
Well, to my disbelief, I was flat-out lied to and
told it was my fault that I didn't further
investigate and read the fine print.
I was eventually pushed out after I was told by
financial aid that my federal loans are all spent,
and I would need to open another private loan and
pay out of my pocket monthly.
In the beginning, I was told my federal loans
would cover my entire two year program, and now I am
staring at my withdrawal form from Heald, and
completely crushed inside, knowing that I spent two
whole years of Heald, and now I am unable to finish
because the lie Heald told was finally on Front
Street, and the students were starting to see what
was going on, how we were being scammed, and now
we're left with nothing to show from Heald.
It has been two years since that fateful day
which I had no choice but to withdraw. Heald has
since closed, and now thousands of students are out
of luck, with thousands of dollars in student loan
debt.
This is the problem with education, funding
schools that have no interest in their students, no
interest in helping these students succeed, just out
to swindle every last bit of money.
I will not pay back a fraud of a school that
did nothing for me and for the thousands of students
who are left with nothing but a bill. This should
not be happening.
Now it's a big fight with Department of
Education to get these student loans discharged,
when it has been stated by the Department of
Education that Heald did commit a fraud, but,
somehow, it has been left to the students to figure
that out for themselves.
This cannot continue. Help these students
get their lives back. Discharge these student
loans. Corinthian broke the law.
MS. WEISMAN: Next, we have Nick Campins, from
the Deputy Attorney General from the California
Department of Justice, the Office of the Attorney
General.
SPEAKER COMMENTS BY NICK CAMPINS
NICK CAMPINS: Good morning. Good morning. My
name is Nick Campins. I'm here today to testify on
behalf of the California Department of Justice, the
Office of the Attorney General.
I want to talk a little bit about the
importance of streamlining the defense to repayment.
I'm the lead Deputy Attorney General assigned to my
office's case against Corinthian Colleges and its
subsidiaries that operated Heald, Everest, and
WyoTech.
As that litigation demonstrates, providing debt
relief to students in cases involving alleged state
violations is the appropriate and the just action to
take in the face of widespread allegations of
misconduct.
We allege, among other things, that Corinthian
misrepresented the job placement rates; they
advertised for programs that they did not even
offer, for example, advertising for ultrasound and
X-ray tech programs that were not even in their
catalogs; they unlawfully used the official United
States military seals in advertising; and that they
misrepresented the transferability of credits.
These alleged misrepresentations go to the very
core of someone's decision to attend college. This
education that they were promised was for a very
steep price. For example, at Heald College here in
San Francisco, they charged $39,510 in tuition and
fees and $3,500 in books and supplies for an
associate of applied science degree in medical
assisting.
These students who attended the schools were
from a very vulnerable population. As we allege in
paragraph 3 of our complaint, they were near the
federal poverty line.
Many, they were also, according to internal
company documents, targeted because they were
isolated, impatient individuals with low self-esteem
who had few people in their lives to care about
them, and who were stuck and unable to see and plan
well for their future.
The Department needs to develop simplified and
streamlined procedures to help vulnerable students
who have been the victims of unlawful activity, and
it needs to do so on an urgent basis. That is why
we strongly support the Department's simplified and
streamlined procedures to help vulnerable students
who have been victims of unlawful activity, and we
believe that the attorney generals should be
represented as negotiators and should play an
important role in the negotiations.
I next want to talk a little bit about the
critical role that is played by the attorney
generals in this space. While AG's are not the
primary regulator, we are in a position to respond
to and investigate the most egregious cases.
The Department's streamlined approach to the
adjudication of many Heald students' claims
demonstrates the power and efficiency of looking to
prove wrongdoing on a systematic basis and working
together with AG's.
Our office was the first to bring litigation
against Heald in October 2013, and our
investigations served as the first salvo in what
would ultimately prove to be historic action by the
regulatory community, including the Department of
Education.
As that matter demonstrates, AG's can and will
provide evidence and material support to the
Department in adjudicating wrongdoing. AG's have
practical experience in understanding the interplay
between defense to repayment and state law
violations, and we have concrete ideas about how the
process might be streamlined.
AG's understand false advertising. We
understand unfair competition laws and how they
apply to for-profit schools, experience and
knowledge that will prove invaluable in the
negotiations.
Our office has leveraged its awareness to lead
an unprecedented effort to assist students,
including a dedicated website, interactive tool, in
collaboration with legal aid organizations, to help
secure legal advice and assistance. In fact, more
than 12,000 students have visited our website, and
nearly 5,500 of those students have completed our
online interactive tool.
Again, AG's offices should be included in the
negotiations as negotiators. The AG community is
already very engaged in this issue. The attorney
generals of Massachusetts, California, Connecticut,
Illinois, Kentucky, Maryland, New Mexico, New York,
Oregon, Pennsylvania, and Washington State, and
others, all plan to submit a joint written comment
concerning the proposed rulemaking.
As noted, the current decisive factors in the
defense to repayment are proof of a state law
violation, which we are, by definition, in a great
position to opine on.
We understand what it takes to prove the case,
and how difficult it can be for individual students
to do so in the context of well financed schools and
in the limited legal recourse given to them, given
the proliferation of arbitration clauses in
enrollment agreements.
We also bring a unique perspective. We
understand both the interest of protecting students
and the interests of regulators in the government.
AG's have been in this space for decades, and
we have the breadth and depth of experience
necessary to understand these issues and contribute
meaningfully to the negotiated rulemaking. We hope
that you will have AG office negotiators on the
committee.
Thank you very much.
MS. WEISMAN: Next, we have Joe Rideout, from
Consumer Action.
SPEAKER COMMENTS BY JOE RIDEOUT
JOE RIDEOUT: Good morning. My name is Joe
Rideout, and I'm here speaking on behalf of Consumer
Action. Consumer Action empowers low and moderate
income and limited speaking and often
under-represented consumers nationwide to
financially prosper through financial education,
community outreach, and issue-focused advocacy.
(Reporter clarification.)
It has been over a year since Consumer Actions
joined other advocates in requesting the Department
of Education free students and their families from
their debt burdens as a result of being deceived and
mislead by the illegal practices of Corinthian
Colleges.
As the department of Special Master Smith
established a rulemaking committee to prepare
proposed regulations for the federal student aid
programs, he would like to formally identify
criteria that are essential to a fair and just
process in the borrowers moving forward.
Number 1, all federal loans are currently
eligible for discharge under defense to repayment,
and the negotiated rulemaking should address all
types of loans, include Federal Family Education
Loans, Perkins, and consolidation loans, as well as
Direct loans, regardless of when they were issued.
The Department has previously made clear in the
1995 Federal Registry notice that it has the defense
to repayment authority for all types of federal
loans. Additionally, defense repayment is in the
master promissory note Federal Family Education
Loans.
Number 2, automatic discharges should be
applied when the evidence warrants it, as is the
case with Corinthian Colleges. Borrowers should not
be required to submit, nor should they be judged on
individual application for a loan discharge.
The current process is often confusing and too
technical to be completed correctly on its own.
Instead, we urge the Department to grant relief on
an entire group of borrowers when it applies to an
institution's proven violations at the federal and
state levels.
Full loan discharges should then be applied to
all borrowers covered by a group process who
establish a defense to repayment, including a refund
of any amounts paid on the loans, and removal of all
information regarding the loans from the credit
reports.
We also urge the Department of Education to
initiate an investigation whenever it has evidence
suggesting that a group of borrowers may be entitled
to defense to repayment relief, especially in the
case of non-Heald Corinthian campuses. It should
notify borrowers of its investigation and grant
automatic discharges where appropriate.
Number 3, add false certification regulations
to the committee's agenda. Under false
certification, the Department is able to discharge
borrower's obligation to repay a Direct loan if the
school falsely certifies the eligibility of borrower
to receive a loan. This is certainly the case with
Corinthian Colleges, which was fined $30 million
earlier this year by the Department of Education for
falsifying job placement rates.
Number 4, make regulatory changes to stop the
manipulation of cohort default rates and strengthen
the 90/10 rates. Some schools have admitted to
artificially keeping their default rates down during
the period when they are held accountable.
The Department can prove the integrity of
cohort default rates and protect borrowers by
immediately taking the following actions: Cracking
down on cohort default manipulation through
administrative actions and strengthening regulations
in the upcoming negotiated rulemaking; eliminating
defaults from borrowers' records if the Department
is eliminating those defaults from schools cohort
default rates due to improper servicing, and
strengthening the 90/10 rule by closing the loophole
that allows schools to count GI Bill funds and
Department of Defense tuition assistance as private
rather than federal dollars.
For-profit colleges should not be funded solely
by federal taxpayers, and federal taxpayers should
not be propping up low quality schools.
Thank you for the opportunity to speak on
behalf of low and moderate income students and their
families who are burdened by the debt of worthless
degrees obtained from schools that knowingly
defrauded them.
This is a vital opportunity for the Department
of Education to help borrowers who have suffered
from the fraudulent acts of for-profit schools, and
also to protect those who may be victimized in the
future. We urge you to consider our suggestions and
recommend that the Department implement them as soon
as possible.
Thank you.
MS. WEISMAN: Next, we have Katrina Hess, who
is a former Heald student.
MEGUMI TSUTSUI: She sent me a message saying
that she was running a little bit late, and so
she'll be here around 10:30.
MS. WEISMAN: So, with Katrina running late, we
do have some space for her later. We do not have
any additional speakers right now. We do have
someone on the agenda later, Kay Lewis from Higher
Education Loan Coalition.
Is Kay present at this time?
KAY LEWIS: Yes.
MS. WEISMAN: Kay, would you like to speak now?
KAY LEWIS: Sure.
MS. WEISMAN: Thank you.
SPEAKER COMMENTS BY KAY LEWIS
KAY LEWIS: Good morning. My name is Kay
Lewis, and I speak to you today on behalf of the
Higher Education Loan Coalition, a grass roots
organization comprised of schools dedicated to the
continuous improvement and strengthening of the
federal student loan programs.
(Reporter clarification.)
Its members are practicing financial
professionals working at participating institutions.
I would like to thank the Secretary for the
opportunity to provide the Department of Education
with comments on federal student loan programs that
may be addressed in the negotiated rulemaking
process early next year.
I was encouraged to see that defense to
repayment will be the primary topic of negotiations,
as the protection of our student borrowers is the
coalition's greatest concern. To ensure that the
federal loan programs continue to be a strong, vital
source of loan funding for students, I wish to speak
to defense to repayment regulatory issues and other
regulatory issues, as well.
Defense to repayment regulations need to be
strengthened and broadened to more accurately
reflect the types of situations that borrowers face
when inadequate educational programs and possible
wrongdoing at the institutional level did not
prepare the borrower for the degree or educational
credential.
Our federal loan programs are in agreement
between the Federal Government, postsecondary
institutions, and the student borrowers, that they
will receive the education they sought to prepare
them for employment in their chosen field. It is
essential that negotiators consider the following in
providing adequate protection to our student
borrowers.
First, defense to repayment should apply to all
federal loan programs. FFEL, Direct, and Perkins
loans should be eligible for inclusion in this
process. All government loan borrowers should be
treated consistently, regardless of the loan
program.
In the past, the Department has been clear that
it has the authority to implement defense to
repayment for all of these loan programs, and we
encourage the Department to exercise this authority.
Second, when evidence suggests that the abuse
or wrongdoing was program or campus-wide, then a
simple proactive process should be in place to
automatically grant defense to repayment status to
students. In these situations, defense to repayment
should not be an individual process. The case will
have already been made, and putting students through
unnecessary processes and lengthy delays is not in
the borrowers' or the government's best interest.
Third, explore with negotiators the use of
false certification provisions as a means of
discharging loans, when appropriate, instead of
using defense to repayment. This may simplify the
process for students and avoids complexity with
state laws.
Four, schools should be held accountable for
any wrongdoing with the defense to repayment
process, and ultimate debt relief should not be
delayed while enforcement proceedings are ongoing at
the institutional level. The student borrower needs
to be made whole, regardless of what happens at the
school level.
Beyond defense to repayment, negotiators should
also consider eliminating interest capitalization.
Regulations allow for but do not require interest
capitalization each time the borrower changes
status, beginning with the end of the grace period
and under certain circumstances and income-driven
repayment plans.
Interest capitalization increases the principal
amount of the loan and the total cost of borrowing,
since future interest accrues on capitalized
interest. Elimination of capitalization will help
borrowers reduce their cumulative debt, which could
affect the amount of their monthly payment and their
ability to participate in other economic activities,
such as home purchases or retirement investments.
Capitalization is not required under federal
law. It's a holdover from the previous Federal
Family Education Loan program. It's not necessary
to charge borrowers additional interest, and we urge
the Secretary to consider elimination of this
practice in the federal student loan programs.
Negotiators may also want to consider
supporting efforts to limit borrowing. Current
statutes allows aid professionals to limit the
amount a student may borrow on a case-by-case basis.
However, the Department has strongly cautioned
against restricting borrowing, since the Federal
Direct Loan Program is an entitlement program. Some
schools no longer participate in the federal loan
programs because they fear their students will
over-borrow, and they have no options to restrict
borrowing. This forces students at these schools
into more expensive private loan programs.
With the counseling tools now available to
inform students about the consequences of borrowing,
a professional should be given an opportunity to
develop programs that would not unnecessarily
restrict borrowing, but educate borrowers and help
students borrow responsibly.
We are not advocating for more loan counseling.
We are advocating for aid officer discretion to
build programs and inform borrowers, with the
authority to limit borrowing when it is not in the
best interest of the student, the institution, or
the taxpayers.
In closing, I would like to thank you again for
the opportunity to present this testimony on behalf
of the Higher Education Loan Coalition. Many of our
members were the first schools to implement these
very loan programs over 20 years ago and have years
of expertise in operational and policy issues, as
well as compliance with the regulation for the
program. The coalition looks forward to
participating in the negotiated rulemaking process
that will occur in 2016.
Thank you.
MS. WEISMAN: At this time, we have no other
speakers present.
Is there anyone who is in the audience who
would like to speak now?
MEGUMI TSUTSUI: Sure.
MS. WEISMAN: Thank you. If you can just speak
a little bit louder into the microphone.
MEGUMI TSUTSUI: Yes, sure.
SPEAKER COMMENTS BY MEGUMI TSUTSUI
MEGUMI TSUTSUI: My name is Megumi Tsutsui, and
I'm an attorney at Housing and Economic Rights
Advocates, also known as HERA. HERA is a nonprofit
organization dedicated to promoting economic justice
and protecting consumers against financial abuse.
We have held several workshops in conjunction
with Bay Area Legal Aid and East Bay Community Law
Center to address the Corinthian disaster and to
help students navigate the aftermath, and we are
working with numerous students who went to
Corinthian and other predatory schools and whose
best recourse is to have their loans discharged
under defense to repayment.
I'm here to share one story in particular, that
of Mario Campa. Mario Campa immigrated from Mexico
in his twenties and has very limited English
proficiency. He saw an ad for WyoTech and brought
his girlfriend with him to the recruitment meeting
so she could help translate for him.
Mario Campa was told that if he signed up for
WyoTech's HVAC program, he would be guaranteed a job
upon graduating, making, at minimum, $15 per hour as
an apprentice. After five years, he would become a
journeyman and make at least $45 per hour.
The subject of his English proficiency never
came up. Mario Campa struggled through his
English only courses. At some point, one of his
classmates told him that he needed to have a GED in
order to graduate, so he took the GED in Spanish and
presented it to his school.
When he graduated, it became clear that
everything WyoTech had told him was a lie. They did
nothing to help him find a job. When he tried to
find a job in his field, he was told by employers
that they don't take students from WyoTech because
they are poorly trained.
He finally got someone he knew to hire him at
$10 an hour, and, since he graduated from his
program in 2007, he has never been able to find a
job paying him even $15 an hour. As a result, he
has had to declare bankruptcy, and he has defaulted
on his Federal Family Education Loans, his FFEL
loans.
His story is awful and, also, all too common.
Since we started helping Corinthian students just a
couple of months ago, we have spoken with six people
who attended this WyoTech HVAC program in Fremont
from 2006 to 2015, who all shared similar stories.
We have spoken with about 170 former Corinthian
students altogether in just a couple of months, the
vast majority of whom would only be eligible for a
discharge through defense to repayment. They, too,
share strikingly similar stories to that of Mario
Campa.
In light of Mario Campa's experience, and other
students' stories we've heard, I'd like to make four
points about the Department's negotiated rulemaking
agenda. First, there needs to be a clear and
transparent process that is easily accessible for
students eligible to receive a discharge of their
loans under defense to repayment.
This process should also have language
accessibility. In our joint workshops with Bay
Legal and EBCLC, we saw hundreds of students who
potentially were eligible for defense to repayment.
They all attended Corinthian schools, which
were known to have been shut down for their
misconduct, which has been going on for years.
While some students had heard that their loans might
be eligible for discharge, virtually none of these
students knew how to access that process.
Many of the students had seen the Department's
website describing the application process, though
virtually none had submitted an application, because
they didn't understand the process and thought it
was too complicated.
Second, all federal loans should be eligible
for defense to repayment discharge and should be
discussed in the negotiated rulemaking. It should
not be limited to Direct loans only. Mario Campa
should not be treated differently for having FFEL
loans, while someone else in a same situation is
eligible for a discharge because she took out direct
loans. The Department should address all federal
loan borrowers equally.
Third, automatic group relief should be given,
where warranted. Individuals who attended schools
and programs known to be predatory should not be
forced to submit complicated or individual
applications to have their loans discharged.
This should be the case where state attorney
generals and federal law enforcement agencies have
already done the Department's job and amassed the
evidence of widespread misconduct for certain
schools. This should also be the case where the
Department receives evidence from students
themselves documenting repeat patterns of fraud over
time.
The Department should also have a process for
investigating complaints and determining whether a
school is falsely marketing its program or falsely
certifying the eligibility of students for federal
student loans. This will ensure that bad schools
are caught early, that harm to students is
minimized, and that taxpayers are not stuck footing
the bill for misconduct by predatory schools.
Where the Department is in receipt of school
misconduct, it should proactively identify students
impacted by predatory schools and programs and
automatically discharge their loans.
Finally, false certification and other
discharge regulations should be revisited and
expanded alongside defense to repayment discharges.
In Mario Campa's case, the school falsely certified
his eligibility for federal financial aid.
There is no way that Mario, having very limited
English proficiency, could have benefited from an
English only course without any ESL support, despite
having passed a GED test. Yet, for false
certification, there is only one ability to benefit
for him that does not apply in his situation,
because he received a GED while enrolled in his
program.
It would serve both the Department and students
to revisit regulations for false certification and
other discharges to provide an additional and
simplified avenue for relief for students who
attended schools that not only defrauded them, but
also defrauded the Department by falsely certifying
students' eligibility for federal loans.
Thank you again for allowing me to testify on
behalf of HERA's clients.
MS. WEISMAN: We do not have any additional
speakers at this time. We would like to have
Katrina Hess, the former Heald student who was
originally scheduled earlier, to speak at 10:40,
after our scheduled break.
Is there anybody else who is in the audience
who would like to speak at this time before we take
a break until 10:40, or, if there is anyone who
previously spoke this morning that would like to
speak again, to return for additional comments?
If you could please give your name again.
FURTHER SPEAKER COMMENTS BY DAWN LUECK
DAWN LUECK: Hi. Dawn Lueck. So, one of the
things that I want to point out doesn't directly tie
into the negotiating rulemaking, but, again, I want
to go back to language that the Department of Ed
uses, and I just, again, I continue to be so
disturbed by your guys' language.
One of the things I want to speak about is this
new position you guys have created with a Special
Master. I cannot even begin to say how perverse
that title is. To even think that you guys would
use the term, Special Master, aka, the BDSM, the
borrower defense Special Master, is just sickening.
Well, when I hear those terms, what it makes me
think is, the Department of Ed must really think we
are indentured slaves. They really must be thinking
that these students need a Special Master to oversee
this process of debt that legitimately needs to be
discharged. So, I wanted to testify on that and get
it on the record that I think it's absolutely sick
and disgusting.
I wish Special Master Smith the best of luck.
I don't think that this is anything personally
directed towards him. I'm sure he's going to do a
fantastic job, but you guys really need to take a
step back and think about the verbiage and the
language that you guys use moving forward, and be a
little bit more sensitive to the people, to the
public, to the history of this nation.
I mean, again, it's sickening, disturbing, and
I will say, as a student, I'm not alone, and I am
not your indentured slave, and we will continue to
refuse to pay back our loan debts until you guys
actually acknowledge the rights that we have to
education.
It should not be a privilege, it should be a
right, and everybody should be allowed equal and
affordable opportunities to get an education without
having to be captured by this system, this crisis
that we are having around debt.
Thank you.
MS. WEISMAN: Is there anyone else who would
like to speak or to return to podium?
We will adjourn until 10:40 this morning.
Thank you.
(Recess: 10:08 a.m. to 10:40 a.m.)
MS. WEISMAN: Good morning, again. We'd like
to resume, and our speaker will be Katrina Hess, a
former Heald College student.
SPEAKER COMMENTS BY KATRINA HESS
KATRINA HESS: Hi, my name is Katrina Hess, and
I'm a graduate from Heald College in the pharmacy
technician program. Heald led me to believe that I
was wronged by the university school system that I
attended previously, and that I needed to remarket
my skills, and that without Heald, I wouldn't be
able to reach any of my goals in life.
I was laid off in my career as a regional
retail manager in 2008, along with much of the
American workforce. For two years, I was unemployed
and unable to find work, repeatedly told I was
either too experienced or not experienced enough.
Depending on government benefits and relying on
others, I struggled to make ends meet, and I was
desperate for a break to get a chance to make my
life back together. I contacted Heald after
watching a television commercial. And, one day,
they told me I was like the other students they had
enrolled, and their other students successfully
changed their lives.
They practically guaranteed me a job, saying
they had a proven record that of one in three
students became enrolled in their major, by
graduation, and that I would be able to get this job
by attending their program and having access to
their inside connections with companies offering
lifetime job placement and security.
The Stockton Heald student recruiter pushed me
into enrolling in the pharmacy technician program.
As she claimed, it was one of the best programs in
the school. She said that because of the upcoming
Obamacare initiative, the demand for pharmacy
technicians would increase by 30 percent by 2013.
The market was in desperate need of qualified
individuals who were professionally trained and were
not just off the street. She said that in order to
get that secure type of employment, I would have to
go to Heald.
My experience differed from what Heald promised
me. For starters, I was enrolled and attending
courses before being told what it would cost for the
program. After enrolling, I was told that my
financial aid application was denied, and I had to
pay out-of-pocket, take out loans, both from the
school directly, as well as from the Department of
Education.
They lied to me, and they lied to you. Heald
Stockton had designated financial aid workshops that
their students would attend. They would fill out
the financial aid applications for the students and
have the students sign them.
I attended Heald Stockton for two quarters
while witnessing my fellow students have the same
financial issues, delinquency letters, missing
tuition checks and being pulled out of class because
they owed money to the school.
When I transferred to Heald Hayward, I was sent
multiple delinquency letters from Stockton telling
me that I owed over $11,000 for my education time
with them. I was also told they weren't counting my
Department of Education loans, because they never
got them, even though I was paying monthly loan
payments for federal loans while I was enrolled.
By the time I was supposed to graduate Heald
Hayward, I was told in order to graduate I had to
take out another loan directly with the school.
Two months after graduation, I received another
delinquency letter from Heald saying that they had
messed up my financial aid records and that I owed
more money. They made me take out another loan
directly through them to clear it all up.
You see, they never told me how much it would
cost when I started school. I had to fill out a
FASFA form for every quarter, and each quarter cost
a different amount, depending on how they felt. I
never knew how much it would cost, and it's
ridiculous to believe that they don't owe back those
costs for their lies.
I witnessed other students go through the same
strife that I went through. Heald didn't pick and
choose which majors to lie to. They didn't choose
June of 2010 to start lying to their students.
What happened to me happens to all of the
students enrolling in the program and in the school.
We were loaded with student loan debt, promises were
broken, and we ended up in jobs that are not related
to the careers we went to school for.
It is unfair to me to be stuck holding the bag,
as I was lied and duped by Heald and their
affiliates. They have been allowed to wash their
hands of these crimes that they have committed and
pass the cost on to their victims.
I want justice for all Heald students. We
should not have to go and submit a complicated
individual defense to repayment application for the
well-documented lies and fraud that happened to
nearly all students who attended my program and
attended my school.
Please take all these facts into consideration
and grant automatic group discharges for those who
attended the pharmacy technician program at Heald in
Stockton or Hayward at any point in time.
Thank you.
MS. WEISMAN: We do not have any additional
speakers scheduled for the morning. Our next
speaker is scheduled for 1:00 this afternoon.
If there is anyone present who would like to
speak now that maybe signed up for a later time,
please, let me know.
If there is anyone from the audience who would
like to speak who is not currently scheduled for a
time, please, let me know.
If you could please introduce yourself as you
approach the microphone. Thank you.
THE WITNESS: Absolutely.
SPEAKER COMMENTS BY SANDERS FABARES
SANDERS FABARES: Hello, my name is Sanders
Fabares, and I'm a former student of the Art
Institute. My name is Sanders Fabares, and, though
I'm not a student of Corinthian, I am a victim of
Education based fraud. I am ashamed to say that I'm
a 2006 graduate of the Art Institute of San Diego.
When I first heard about the Corinthian
closures a year ago, I took it upon myself to learn
more about the whistleblower cases towards
Corinthian, the Art Institutes, and other for-profit
schools.
After reading the cases and the personal
stories of students who attended, like myself, and
comparing them to my own, I considered the
for-profit college scandal to be just a modern form
of fabricated servitude, a clear scam that takes
advantage of people who want a better future.
Students who attend the for-profit chains are
victims of predatory marketing tactics. We were
given false statistics on graduation rates, hustled
into taking on high interest loans, and misled by
grossly inflated job placement statistics.
Now, if those statistics reflected the truth, I
know I would never have attended AI, but they
didn't. I received a subpar education that was
nowhere near what was needed to work in a related
field.
My life has been put on hold as I struggle to
pay the debt. I've been paying in order to preserve
my credit, but I do not intend to pay any longer.
I've paid enough, more than enough for a worthless
degree from a fraudulent school, and I will not be
enslaved by inescapable debt for a degree that I've
never once benefited from.
I originally graduated with 32,000 in debt from
federal and private loans. To this date, I have
paid 24,000 towards them. However, I still owe
26,000 towards principal. I was forced to use
deferment forbearance due to economic hardship after
graduation, but I have never defaulted.
My wife, who also went to AI, is much worse
off, borrowing around 80,000 because they refused to
accept general ed classes that she took at a
community college.
Together, we pay about 1,000 a month, but for
what? How am I supposed to validate this huge
monthly expense as anything legitimate?
I will not give them the rest of my life. The
stocks of Art Institute parent company EDMC have
been bottoming out for a while now, but, when the
Federal Government sued EDMC for fraud, the
government got their money back, $11 million worth,
yet, students, the victims of the fraud, still
attempt to pay their loans or suffer the
consequence.
I find it very disconcerting that a company
that has been accused multiple times of fraud
continues to enroll new students to this day. This
past summer, the Art Institutes held open houses
almost every other weekend across the country,
desperately trying to entice more students into
their programs.
Every student that signed up, if we truly care,
we should feel the weight of this on us. We are
allowing this to continue. We need to stop these
debt factories from enrolling future students until
all of the pending lawsuits against them are
resolved. I'd bet those court cases would be
allowed to proceed tomorrow if this weren't the
case.
The Department needs to accept responsibility
for its failure to monitor these schools and make
debt cancellation as effortless as possible. They
have the opportunity to step up and finally protect
students' interests.
Do this by initiating blanket cancellation for
all the outstanding debt for fraudulent schools. We
cannot expect students to act as their own lawyers
throughout an arduous individualized process.
At this point, schools such as Corinthian, the
Art Institute, ITT Tech, and the University of
Phoenix have all been involved in major cases
accused of fraud and deceptive marketing tactics.
The loan providers Navient, Sallie Mae, AES, and
Nelnet have all been involved in major cases
investigations, as well.
The only party in this situation who can claim
any sort of innocence is the student, and it is
unfair to expect people who have already been
victimized by a broken system to now place their
trust in another complicated system which may or may
not be in their best interest in life.
For-profit colleges should have no
representation in this committee, since they have so
widely shown their adherence to using lies as a
common practice. I find it extremely hard to
believe that they have ever put the student's best
interest first.
You need to give students a greater presence on
the rulemaking committee if true democracy is to be
served; not a singular student, but multiple
students representing a variety of different
schools.
We, the students, are the victims of the
system. We are the affected. We are the defrauded.
We, too, are taxpayers who have been paying into the
Pell grants to further support this ongoing fraud we
are victims of. I want to emphasize, all remaining
loans, not just direct loans, should be cancelled
when the degree that they've paid for was one built
upon fraud.
Blanket cancellation needs to be the way that
we do this. We cannot afford to slow this process
down, going loan type by loan type, student by
student, school by school.
How many more generations of students have to
default and cost taxpayer dollars? How many more
people will, in desperation, be taken in by debt
relief scams? How many more students will consider
suicide as the only escape from this debt?
In spite of their belief that a higher
education is a worthwhile pursuit that will lead to
a brighter future, right now, higher education is a
high risk gamble that carries the potential to
destroy lives of students and their families.
Be transparent. Be accountable. Be better.
Be a champion for the students. Regain our trust.
Stop blaming the victims.
Thank you.
MS. WEISMAN: Is there anyone else who would
like to come forward to speak?
At this time, then, we will do an early lunch
break and resume promptly at 1:00 p.m.
(Luncheon recess: 10:54 a.m.)
A F T E R N O O N S E S S I O N
(1:06 p.m.)
MS. WEISMAN: We'd like to resume our afternoon
testimony. We do have speakers scheduled from 1:00
until about 2:00. If you are not on the schedule to
speak, please, see Aaron at the table in the back,
and he will get you registered. We'll also call for
comments from the audience if anybody would like to
come up after that.
We do only have one other person scheduled for
later in the afternoon at 3:45 so, if we don't have
extensive speakers ready to speak, we will have an
additional break. Otherwise, we do plan to take a
break from about 2:30 to 2:40.
Is Angela Perry present?
Thank you.
SPEAKER COMMENTS BY ANGELA PERRY
ANGELA PERRY: Good afternoon, and thank you
for the opportunity to testify.
My name is Angela Perry, and I'm a law fellow
with Public Advocates, a nonprofit law firm and
advocacy organization that's challenged the systemic
causes of poverty and racial discrimination for over
40 years so that all Californians can have the
building blocks to thrive.
Public Advocates has been working with Legal
Aid and advocacy organizations to improve state
oversight of these education businesses, as well as
institutional compliance with federal-state
authorization requirements for the past three and a
half years, and we've made great strides in
California, closing regulatory loopholes and
creating robust disclosures for prospective
students.
Unfortunately, during the same time period,
we've seen our governmental agency focusing its
efforts on assisting institutions, rather than
students, and we have seen story after story of
education businesses in California leaving their
students with insurmountable debt and broken dreams.
Despite the fact that many of these companies
have used deceptive recruitment practices to earn
billions in profits from federal aid programs, these
students are left with crushing debt burdens and do
not qualify for federal student loan relief under
current federal regulations. As a result, they face
a lifetime of student loan debt, which all too often
prevents students from getting a fresh start in
their lives.
As a result, and in light of the recent closure
of Corinthian Colleges, which affected 13,000
students in California, Public Advocates recommends
that the Department of Education take the following
steps to ensure that a borrower defense program is
accessible, understandable, and protects borrowers
victimized by unscrupulous education businesses.
First, the Department should ensure that all
federal loans are eligible for discharge; second,
the Department should use existing findings to grant
automatic group relief to borrowers; and, third, the
application for relief should be simple and
accessible, with as little burden placed on
struggling borrowers as possible.
First, the Department should ensure that all
federal loans are eligible for discharge, including
FFEL, PLUS, Perkins, direct, and consolidated loans,
regardless of when the loan was issued. We also ask
that the Department provide comprehensive relief to
students, including tax free forgiveness of student
debt, and the reinstatement of Pell grants.
There is legislation pending in California, for
example, AB 573, which would restore up to two years
of Cal grant eligibility to impacted students at
Corinthian Colleges, and the Department should
consider following that example.
Unscrupulous for-profit institutions like
Corinthian have hurt and continue to harm students,
and, even if the Department adds defense to
repayment procedures for FFEL loans to the
rulemaking agenda, many borrowers may still have
difficulty accessing a defense to repayment claims
process.
For this reason, it is critical to create a
fair and efficient defense to repayment process that
provides some cohorts of borrowers with automatic
relief, particularly in cases where there are state
or federal findings of widespread wrongdoing.
Second, the Department should use existing
findings to grant automatic group relief to
borrowers. The Department has the power to grant
automatic defense to repayment relief to groups of
students where there is substantial evidence that
the institution has engaged in a pattern of
misconduct and/or fraud.
If a school is closed, or in the process of
shutting down, and/or if a school has been found
guilty of fraud, all students should have their
loans discharged without needing to go through the
complex process of applying for the discharge.
Student loan repayment is a difficult process,
and current forms and procedures for relief include
far too many barriers for students deserving of
restitution.
Lastly, the application for relief should be
simple and accessible, with as little burden placed
on struggling borrowers as possible. The
application for relief should be simple and clear,
and the burden on borrowers should be minimal.
There should be no legal expertise required on the
part of the borrower, and the application should use
plain language.
The Department should make one single universal
form for borrowers, instead of state-specific forms,
and should seek to simplify the application process
wherever possible. The Corinthian closure
highlights the needs for a simpler, more
consumer-friendly application process.
In the case of Corinthian, the Department did
take steps to simplify the process, but, as we've
seen in California, the state with the most
Corinthian students impacted, students still require
access to legal aid in order to be able to complete
the process.
AB 573, which I mentioned earlier, seeks to
provide funding to support legal access to legal aid
in California, but more needs to be done on a
national scale to simplify the process.
Further, borrowers should not be required to
produce written proof of fraud, as many describe
similar verbal recruitment techniques that were
misleading and deceptive. Students were discouraged
by some institutions from keeping records
altogether, and the Department should have internal
records that are sufficient to verify students' form
complaints.
Public Advocates looks forward to working with
the Department and the Administration as it moves
forward with plans to create a borrower defense
program to assist students who attended failing
schools, and ensure that they receive the full
relief they deserve.
Thank you very much for the opportunity to
testify on behalf of struggling students.
MS. WEISMAN: Peter Smith, from the Center for
Responsible Lending.
SPEAKER COMMENTS BY PETER SMITH
PETER SMITH: My name is Peter Smith, and I am
a senior researcher for the Center for Responsible
Lending. CRL is a research and advocacy
organization based in Durham, North Carolina, and we
also have offices in Washington, D.C., and in
Oakland, California.
We're affiliated with Self-Help, a network of
credit unions with over 130,000 members nationwide,
with a mission of preserving and creating family
wealth for underserved people and businesses through
responsible lending and economic development.
We welcome the Department's efforts to provide
relief to for-profit college students defrauded by
their colleges. A well-constructed defense to
repayment rule would be a crucial backstop for the
integrity of a federal student loan program. It
would ensure that students do not bear the risk of
fraud, and would provide an efficient path for the
Department to provide relief to eligible borrowers.
At CRL, we believe in the power of well made
loans to help build financial success, including
taking loans out for college. But, for too many
for-profit college students, the title IV program
has turned into a source of harmful predatory loans
that can never be discharged in bankruptcy. A
robust DTR rule could help mitigate the harm caused.
The collapse of Corinthian Colleges
demonstrates the need for new, clear rules
protecting borrowers from the disproportionate risk
of consumer protection violations they've faced when
they enroll in for-profit colleges. No student who
has taken out student loans due to the
well-documented consumer abuses in the for-profit
sector should remain liable for the loan.
Many of the students most likely to be fraud
victims are low income students and/or students of
color. A strong DTR rule would prevent the title IV
program from becoming the source of additional
financial harm to the borrowers who can least afford
it.
The new DTR rule should have the following
basic characteristics: It should be based on a
broad, general standard of federal and state
consumer protection law; consider a broad range of
evidence to show consumer protection violations;
give heavy weight to actions by state attorneys
general and federal consumer protection authorities;
provide cohort-based relief, whenever possible; give
cohort members opt-out, automatic relief, rather
than requiring individual applications and showings
of reliance or harm; and be applicable to all
federal loans, with no time limit -- Direct, FFEL,
and Perkins.
In formulating the DTR rule, the Department
should take into account the realities of life for
low income borrowers. Creating high barriers to
relief by requiring that they fill out lengthy,
legalistic forms may mean that they are shut out of
relief.
The Department has the information and the
power to simply automatically forgive loans when it
determines that a group of borrowers has been
defrauded. It would be unfair for the Department to
continue collecting these loans just because a
borrower moved and did not receive the form, or
because they were unable to complete it adequately.
In addition to DTR, the rulemaking agenda
should be expanded to include revised regulations
for closed school and false certification
discharges, a ban on forced arbitration, and
amendments to the cash management rule that would
better prevent institutions from mishandling federal
funds that could otherwise be used for borrower
relief.
Thank you very much for the opportunity to
provide this testimony. We've also provided some
written testimony. We're grateful for the
Department's continued efforts to protect students
from harmful student debt.
Thank you.
MR. DiPAOLO: Thank you.
MS. WEISMAN: Thank you.
Alyssa Picard, from AFT Higher Education.
Alyssa does not seem to be here.
Is Juliana Fredman from Bay Area Legal Aid
present?
Thank you.
SPEAKER COMMENTS BY JULIANA FREDMAN
JULIANA FREDMAN: Good afternoon. My name is
Juliana Fredman. I'm a consumer protection attorney
at Bay Area Legal Aid. Bay Legal serves seven
counties throughout the Bay Area. Our clients are
all individuals living in poverty. We also run
eight regular clinics each month for pro per
debtors, and so we see a lot of borrowers dealing
with a lot of debt collection matters.
For our client population, student loans are
far and away one of the biggest issues that we see,
both with our clinic participants and in our regular
intakes.
A huge proportion of the students that we see
attended for-profit schools that often sold them
what have turned out to be worthless degrees and
certificates, with promises of near universal
employment, well paid employment, and many of them
have never been able to obtain any employment in
their field of study.
People often come to us years later after years
of frustration, and, oftentimes, the trigger for
coming is that they finally get a low wage job, and
their payment is being garnished, or their Social
Security, disability, or retirement is being offset
to pay student loans.
So, it's often years later that we hear these
stories about these schools and what happened there.
Oftentimes, the schools no longer exist. So, this
is not just an issue of indebtedness, but also
broken dreams, and, really, lost time, for a lot of
students.
Since the Corinthian closure, we have been
inundated with students who attended one of the five
schools in our service area, and, together with
other legal services organizations, we've held
numerous additional legal clinics to explain these
students their rights, which has been a difficult
task, at times, because so many of them are not
clearly defined, which is why we really, really
welcome this process, to clarify that.
The students and former students who've come to
us via the Corinthian clinics and our intakes tell
remarkably similar stories of very high pressure
sales tactics, promises of near universal job
placements, promises of high wages, externships that
never materialized, false representations about the
transferability of their credits to four year
institutions.
And, to a person, they describe extremely hard
pressure sales tactics, so, you called to inquire on
Friday, you're in class on Monday, and you've signed
loan documents over the weekend, taking out
thousands of dollars in loans.
The tales we hear, to our ear, many would
likely be actionable under our state unfair business
practices laws, under the California Consumer Legal
Remedies Act, and common law misrepresentation; in
some cases, fraud, also, but we wouldn't have the
capacity to do complete claims of those types for
every single student we've seen. We've seen
hundreds of students.
As you know and why we're here is that there is
no general form or application for borrowers seeking
discharge based on school misconduct, but, as you
also know, there has recently been a streamlined
form created for certain Heald students, based on
their program of study and when they enrolled.
But the distinction that we've seen between
students who are eligible and those who aren't for
that streamline discharge highlights the need for
further process, because it becomes so arbitrary.
You'll have students with almost identical facts,
but, one student, for example, who may have enrolled
in one of the named programs six months earlier, but
describes the same job placement numbers, or the
same kind of misrepresentations, can't use the form,
or somebody who doesn't remember four years ago
exactly what they saw on paper, but they remember
what they were told -- they remember those oral
misrepresentations -- they cannot use those forms.
So, I have students who have identical
situations enrolled from 2008 to 2013, a program
that's listed, graduated, looked for work, was never
able to find anything, was promised 90 percent job
rates, was promised a salary within a certain range,
and is still working the same low wage retail job
that she was when she enrolled.
In terms of the procedures we'd like to see,
I'll just go over a couple, and a few key factors
that we think are important for the client
population we serve, who are among the most likely
to be victimized by for-profit institutions engaged
in fraudulent practices.
So, I mean, much of what we'd like to see
involve this being minimally burdensome on the
students, and we'd like to see automatic loan
cancellation for cohorts of borrowers who are
covered by government findings of wrongdoings.
So, where states attorney generals, oversight
agencies, or federal agencies have reported findings
and evidence that a school's established has
violated federal or state law, regulation, there
should be a process for group discharge of loans
within that cohort. They should not be required to
individually apply when the Department is aware of
widespread and pervasive wrongdoing.
And I think that the number, the low numbers of
eligible students who apply for closed school
discharges support the contention that unnecessary
applications where the Department has the necessary
information serve as barriers for students to obtain
relief that they are entitled to.
And, often, the students who do not submit
applications are among the most vulnerable, so they
may be limited English speakers, they may be
disabled, or have other kinds of barriers that are
preventing them, many homeless, preventing them from
completing the necessary documentation.
Where application is required, any burdens of
proof should be fair to the borrowers. Paper
documentation should not be dispositive or required.
Sworn declarations should be considered evidence,
establishing eligibility for relief.
Again, often, by the time the student realizes
the extent of the misrepresentation, a lot of time
has passed, and the school may have closed, or, in
some cases, seems to have evaporated completely, and
it's no longer possible to gain access to supporting
documentation.
And, finally, as I think I was hearing from
previous speakers, applying for a borrower's defense
to repayment should not require legal expertise. It
should be straightforward and should allow students
to attest to the facts that would underlie a claim
without requiring them to be able to frame these
facts as legal claims.
And, again, we also would like it clarified
that this discharge would be eligible to all
borrowers in federal loan programs; Perkins, Direct,
and FFEL loans, and those who have consolidated
their loans.
A more comprehensive discussion of each of
these points was provided. We signed onto joint
comments that were submitted in response to docket
number ED-2015-ICD-0076, so I would urge you to
review those in your discussions of this for more
kind of comprehensive discussions of our thoughts on
this.
Thank you.
MS. WEISMAN: Did Alyssa Picard arrive?
Mark Anderson, from American Federation of
Teachers.
SPEAKER COMMENTS BY MARK ANDERSON
MARK ANDERSON: Good afternoon. My name is
Mark Charles Anderson, and I have the privilege of
being an adjunct professor of health education at
the San Diego Community College District. I have
been doing that for 22 years.
During that time, I have also taught at other
state and private institutions of higher education.
I am also a trustee elected to the San Diego County
Board of Education.
I'm a board member of the California County
Boards of Education, and a member of the House of
Delegates of the California School Board
Association.
Education is my life, my avocation, and when I
hear the tragedies of these students being impacted
by the overwhelming financial burden, it breaks my
academic heart in a lot of ways.
I am here today as a representative of the
American Federation of Teachers and our 1.6 million
members. I want to thank the Department for the
opportunity to speak today and to hear these comment
from myself and others.
Financial burdens of the types incurred when
people are enrolled in colleges and technical or
trade schools that do not have the best interests at
heart of the student are a chronic disability for
the recovering student.
In looking at the possible remedies, the AFT
supports your efforts to help these individuals get
out from under an enormous and, often, a
quality of life threatening burden.
The AFT believes, to quote the Special Master's
report of 3 September 2015, to develop a system that
is fair, transparent, and efficient. If the loan
was originally made under fraudulent circumstances
on the part of the educational program, it should be
discharged. Period.
Relief should be as broad-based and as easy to
access as possible. The negotiated rulemaking
should address all types of loans, and regardless of
when the loans were issued, as all loans are
eligible for defense to repayment discharge. This
includes the Federal Family Education Loans and the
Perkins loans.
Automatic group discharges should be granted
where the evidence warrants it. Students should not
have to apply on a case-by-case basis where there is
documented systemic wrongdoing on the part of the
educational program.
If the DTR authority cannot offer the broadest
relief, the Department of Education should add other
authorities to the negotiated rulemaking agenda.
And, finally, the federal DTR standards should not
preempt any stronger state law.
These issues adversely impacted too many
students for too long. The American Federation of
Teachers encourages the Department of Education to
proceed as fast as bureaucratically possible to
allow these people to achieve a quality of life
without the overwhelming financial burden that has
been incurred.
Thank you.
MS. WEISMAN: Makenzie Vasquez?
DAWN LUECK: So, she's not here, but we can
read another student's statement in place. I don't
know if she's going to make it.
Or, do you just want to move forward?
MS. WEISMAN: If you have her statement, or --
DAWN LUECK: We don't have hers, but we have
another student's.
FURTHER SPEAKER COMMENTS BY DAWN LUECK
DAWN LUECK: Hi, there. So, my name is Dawn.
I'm going to read on behalf of some students we were
able to get some additional statements for today, so
I'm going to be reading on behalf of Niki Howland.
All right. So, in June 2000, I was 18. I knew
nothing about credit or lending, as I come from a
poor family. I myself was unemployed at the time,
and my mom was a single mom working as a waitress
making $2.13 per hour, plus tips, while supporting
three kids.
I called ITT Tech recruiter after seeing a
commercial. Her name was Claire Levitt, from ITT
Tech, Albuquerque, New Mexico. She immediately
rushed me through the loan process. I was told the
school would cost me around 18,000, with my Pell
grant. Shortly after recruiting me, Claire left the
school.
I have kept all documentation, and I have proof
of everything. Even after all these years, I have
my old student ID. I didn't know back in 2002 to
2004 that the recruiter pulled my credit, my mom's
credit, and now my ex-husband's credit, until
recently, when I submitted evidence to the CFPB to
file a complaint.
All of our credit was denied, but ITT Tech
still found a way to fund me by means of predatory
lending. I had no idea I would have high interest
rate private loans with accruing interest while I
was attending ITT Tech.
I had no idea I would even have private loans
on top of the multiple federal student loans. I
discovered about 11 federal loans and three private
loans six months post grad.
I was actively trying to find work in my field.
ITT Tech stole my Pell grant as it was applied to my
debt. I was so determined to break the cycle of
poverty in my family, and I was promised a great job
and a bright future by ITT Tech. I was sold hopes
and dreams, which I later found out to be all lies.
Now, all I have is a revolving door of high
interest rate debt with a useless piece of paper ITT
Tech calls my associate degree in computer science.
I was one of those statistics likely to
default. I have never defaulted, but I'm stuck in a
cycle of revolving debt. I ended up with 11 federal
loans totaling 22,000 after I graduated.
Interest accrued and compounded. I had no idea
I would have three high interest private loans with
accruing interest while I was attending the school.
All three private loans totaled $6,074 not including
the 13.25 percent interest rate with a 10 percent
origination fee on all three loans charged to me
when Bank One ITT Tech sold my loans to Sallie Mae,
now Navient.
The amount of 6,000 seems payable, right?
Well, after paying for nearly 12 years, my balance
as of September 2015 is $4,047, which means I've
roughly paid $2,000 in 12 years. Navient randomly
compounds interest every time I make a payment.
No bank will touch these private loans held by
Navient. My payments go directly to interest. This
is true for my federal loans, as well. As of
September 2015, I owe Navient more today on two
FFELP loans, one subsidized, and unsubsidized.
I had multiple seemingly small Stafford loans,
which I later consolidated under FFELP. How is it
that I've made these payments, and I owe more in
federal loans than I did in 2004, when I graduated?
I have been paying for 12 years. My student loans
totaled 33,000 when I graduated. I now owe 33 and a
half thousand.
It's the biggest debt I have. I have
absolutely nothing to show for it, except for a
piece of paper on my wall with zero value in the job
market. At this rate, I'll be paying it off for the
rest of my life.
I've never used my degree. I was promised job
placement, but the only thing ITT career service
gave me was a half-inch packet with printouts from
and other employment websites. I
visited career service about nine times while I was
a student, and about four times post grad.
Each time I visited, I was given a packet of
printed-out jobs listing for my, quote, field. I
had already been applying for work throughout my two
years, and well after. I finally found a job
working for a phone company in Florida in 2005,
which had nothing do with my degree of applied
computer science.
I fix phone lines, and I install DSL in small
businesses and homes. I was a blue collar worker,
driving around in the hot sun running cable. I went
from phone box to phone box to troubleshoot static
on the phone lines.
The education was poor. I don't know how I
even passed trigonometry or algebra. I have no idea
how to do that math. I even have old homework that
I saved.
I went to school for a computer networking
systems of applied science associate's degree. I
still have no knowledge of how to administer
networks.
It should have been noted that I had no formal
education in middle school or high school. I
received my GED equivalent from an unaccredited
Scientology classroom called Dennison Academy at the
age of 14 in 1998. I've never studied for it. I
paid $500 for a fake piece of paper saying that I
have my GED equivalent.
The student debt crisis ruins lives. Even if
you don't default, like me, you will be paying for
the rest of your natural life. My student debt
affects the lives of my children, my husband, and
myself.
If the school is defunct, the degree is null
and void, and so should be our debt. I am fighting
for classwide student debt discharge for all victims
of defunct for-profit colleges. The student debt
crisis needs bipartisan reform, and our debts
eradicated. Thank you for listening to my story.
Niki Howland.
MS. WEISMAN: Did Alyssa Picard arrive yet?
Rachelle Feldman, from UC Berkeley.
SPEAKER COMMENTS BY RACHELLE FELDMAN
RACHELLE FELDMAN: I'm Rachelle Feldman. I am
here representing the University of California,
where I am the Director of Financial Aid and
Scholarships at the Berkeley campus, and, for full
disclosure, I'm also an executive board member of
the Higher Education Loan Coalition.
The University of California serves nearly
250,000 undergraduate, graduate, and professional
degree students, and graduates a very high number
and proportion of low income students.
Federal loans, although we've heard some horror
stories, are an integral part of assuring access to
a high quality education for our many needy
students, and I'd like to thank the Secretary for
the opportunity to provide the Department with
comments on loan repayment issues that may be
addressed in the next negotiated rulemaking process
early next year.
The defense to repayment regulations are a very
important protection for student borrowers and need
to be strengthened and aligned to the current real
world types of situations that some borrowers face.
These borrowers may have attended schools where
institutional wrongdoing occurred, or the
educational quality of degree or certificate
programs was lacking. These student borrowers were
then unable to obtain their degree or educational
credential, or the one they did obtain was not
enough to make them ready for post-graduation
employment or for repayment.
It's essential to the strength of our loan
programs that we minimize the defense to repayment
claims in the future and ensure that institutions
are providing borrowers the education that they
sought and expected to receive.
To that end, we would like to encourage the
Department to strengthen the enforcement and
evaluations of the requirements for title IV
eligibility of institutions. Accreditation and
program participation evaluation should help ensure
that bad actors and bad programs are not eligible
for federal lending or borrowing.
Potential students should feel confident in the
quality of education they receive. Preventing the
awarding of loans for inadequate programs will
lessen the need for discharges based on defense to
repayment and help safeguard borrowers and taxpayers
alike.
In addition, institutions are required to have
adequate administrative capability to be eligible
for federal aid funds. I don't know why I can't
talk today. Negotiated rulemaking could address
defining benchmarks or minimum standards of capacity
to receive or maintain eligibility for federal loan
programs.
Institutions that do not demonstrate sufficient
controls to detect and prevent fraudulent behavior
on a widespread scale should not be entrusted with
federal dollars.
Prevent manipulation of key data by
institutions. The Secretary should engage
negotiators to discuss and determine how to
strengthen regulations in order to prevent
manipulation of success indicators, such as the
cohort default rate and the 90/10 rule at for-profit
institutions.
While the University of California feels it's
very important to prevent these types of fraud and
misrepresentation that lead to defense of repayment
claims, it is also vital to protect borrowers that
have been misled, or who face a sudden school
closure and are unable to complete their degree.
If there is widespread evidence of fraud or
misrepresentation at a school or program, the
Department should implement a simple process to
automatically grant defense to repayment status for
a group of affected borrowers.
In these situations, borrowers should not be
forced to individually apply for relief. All
efforts should be made to avoid creating individual
hurdles and delays in resolving the situation.
In particular, resolutions for borrowers and
students should not be delayed by enforcement
proceedings for wrongdoing against the school or
school officials, although we do think those should
occur.
In either group or individual cases, when a
borrower applies for discharge of loans under
defense to repayment, their loan should be put in an
automatic forbearance, and no payment should be due
while their situation is being investigated by the
Department of Education. This should apply to all
types of federal loans.
Explore with negotiators the use of false
certification provisions as a means of discharging
loans, when appropriate, such as false certification
of ability to benefit, which I think we've heard
about today.
This may simplify the process for students, and
avoids complexity with taxability of the relief, and
with the 50 different state laws. Negotiators may
help identify appropriate situations for the use of
false certification in these cases.
Discharge of student loans due to school
misrepresentation or fraud should be an exceptional
case and should be treated as such by the
Department, yet, at the same time, both widespread
and individual cases must be undertaken with the
utmost seriousness and with the greatest protections
and considerations for the defrauded borrower.
Other topics that you might consider to reduce
discharges and strengthen the federal loan programs
include supporting institutional efforts to
appropriately limit individual borrowing. Current
statute does allow aid administrators to use
professional judgment to limit individual amounts a
student may borrow on a case by case basis.
However, aid administrators have been strongly
cautioned against this by the Department, as the
Direct loan programs are an entitlement. With more
advanced counseling tools available, negotiators
might discuss frameworks by which the Department
could give guidance on appropriately limiting
borrowing when it is not in the best interest of the
student, school, or taxpayer to take additional
debt.
Could also decouple eligibility for loans and
Pell grants so that some schools who no longer
participate in the federal loan programs because of
fear that a high cohort default rate, for instance,
some community colleges drop out of the federal loan
program and point their students towards much more
expensive and risky private loans in order to retain
their Pell grant eligibility.
Another thing that could be negotiated is
elimination of the interest capitalization to reduce
overall debt. Current statute allows for but does
not require interest capitalization every time the
borrower changes status, beginning with the end of
the grace period, and, under certain circumstances,
in income-driven repayment plans, or when changing
plans.
This capitalization increases the principle
amount of the loan and the overall cost of
borrowing, as future interest occurs then again on
the capitalized amount. As it is not required, we
encourage the Department to consider eliminating
capitalization of interest in these cases.
In closing, I'd just like to thank you again
for the opportunity to speak and testify on behalf
of the University of California and the 250,000
students we represent.
MS. WEISMAN: Thank you.
MR. APPEL: Thank you.
MS. WEISMAN: Tiffany Johnson.
Since Tiffany is not here, is Kara Alba
present?
KARA ALBA: Yes.
SPEAKER COMMENTS BY KARA ALBA
KARA ALBA: Hello. My name is Kara Alba, and
I'm an Equal Justice Works Fellow at the East Bay
Community Law Center, a nonprofit organization and
clinical program of Berkeley School of Law, which
provides free legal services to low income residents
of Alameda County in multiple practice areas,
including consumer law.
We have provided a written comment in
conjunction with the National Consumer Law Center,
and other organizations, which makes additional
recommendation for agenda items for the upcoming
rulemaking, but today I will focus my brief comment
on two recommendations that result directly from the
experiences of our clients.
First, the Department should update the false
certification forgery category to also provide
relief to borrowers harmed by electronic fraud. Our
office assisted one student in submitting a false
certification discharge application after she began
to have her wages garnished for a defaulted loan
that was taken out in her name in 2010.
This client applied for a loan discharge with
the Department several times, but was denied each
time, despite submitting a notarized written
declaration about what happened, a police report, a
bank statement showing her address at the time the
loan was taken out was different than that on the
promissory note, and numerous versions of her
handwritten signature.
In her denial letter, the Department stated
that because the loan was signed electronically, in
order to discharge the loan, she must have a court
judgment which finds her to be the victim of
identity theft and identifies the names of the
individuals who committed the crime.
Because she is unaware of who specifically took
out the loan, and does not have the ability to
obtain such a court judgment, our client will
continue to have her already very low income further
reduced through garnishment for a loan that she
never authorized.
Second, the Department should certify, clarify
eligibility standards and criteria for disqualifying
status discharge. The Department appears to require
that a borrower with a felony conviction show, among
other things, that a licensing statute prohibits
their employment. This ignores the reality that
criminal records prevent employment in many
occupations, including those with no licensing
requirement.
Our office has assisted several students who
otherwise qualified for disqualifying status
discharges, but, because no license is required to
work in the particular field, the current
regulations prevent their discharge under
disqualifying status.
For example, one client attended WyoTech for
HVAC studies. Before enrollment, he informed the
school that he had three previous DUI convictions,
and that he was concerned that he would be unable to
obtain employment.
The school assured him that others in the
program had DUIs, and that it would not affect his
job prospects.
He finished the program and was offered two
different jobs. However, each offer was withdrawn
after the employer discovered his convictions,
because, practically speaking, HVAC workers need to
drive to their job sites.
However, because there is no licensing
requirement for HVAC work, he is not eligible for
discharge under the current disqualifying status
regulations and is left with a large amount of
federal student loan debt, and no job prospects in
his field of study.
Another client also attended WyoTech, where he
studied automotive mechanics. Before he enrolled,
he informed the school that he had a criminal
record, but the school assured him that they had
network connections in high end dealerships, such as
Porsche and BMW, where he could find work.
After completing the program, he has been
unable to find any work in the industry, and was not
aided by the school, because auto dealerships are
particularly concerned with criminal records.
Because mechanic positions do not require a specific
license, this client was also ineligible to apply
for a disqualifying status discharge.
With these experiences in mind, we urge the
Department to consider updating and revising the
current false certification discharge regulations.
Thank you for this opportunity to comment on
the upcoming rulemaking agenda and on behalf of the
low income students assisted by the East Bay
Community Law Center.
MR. DiPAOLO: Thank you.
MS. WEISMAN: Calvin Anderson.
Did Tiffany Johnson arrive?
Alyssa Picard.
We will try them again in a few minutes.
Is there anyone else that would like to speak,
or speak on someone else's behalf?
DAWN LUECK: Thank you guys. We have several
student statements.
FURTHER SPEAKER COMMENTS BY DAWN LUECK
DAWN LUECK: My name is Dawn Lueck. I'm
reading on behalf of Amy Schneider. Let me know if
I go five minutes; this one looks really long.
My name is Amy Schneider. I attended the
Illinois Institute of Art, AI, in Schaumberg,
Illinois, between the years of 2007 to 2010. When I
was in high school, I was in the National Arts Honor
Society. I made really good grades and even took
classes in summer school so that I could finish my
required coursework ahead of time in order to take
as many art classes as I could for my senior year.
I graduated as the most accomplished senior
artist during 2004 school year. I applied and was
accepted at a prestige art school, in Chicago, but,
due to my family's circumstances, I decided to get a
job and move out and live on my own instead of
attending college right after graduation.
I began working in the MIS Department of a
leading Midwest courier company, who had paid
vacations and paid holidays, as well as the option
for medical through their carrier. I was only
making $10.50 an hour after a few years, and the
raises were normally only 25 cents an hour, once per
year.
Due to my desire to better my position in life,
and to create a career for myself, instead of a
dead-end job with no opportunity for advancement, I
decided to look once more into attending college. I
wanted to work while I was in school and retain my
current position, so I looked into local schools.
One of the first schools I looked into was the
Illinois Institute of Art. I already knew that
Columbia was expensive, and my job was in the
suburbs, along with my apartment, so I thought it
would make sense to check out the closest art
school, to make things easier on myself.
They never asked for a portfolio, but were
encouraged by my love of art. That should have been
the first red flag. They had no idea if I had an
ounce of talent to back up an application.
I was also shown falsified job placement rates,
which greatly influenced my decision to attend.
These placement rates showed that the entire school
had over 90 percent placement rates for all students
who graduated.
This really made it seem like the money I was
paying for would pay off and be well worth it. I
was also told that with my background and passion, I
could expect to make $60,000 a year.
I was shown the facilities and told that
graduates would have access to the studios as well
as equipment after graduation, because they had a
great alumni connection for former students.
I was also told that they had many contacts
already in the industry who provided internships to
their students, which was a requirement for
successful completion of the program.
I was told that my education would be
equivalent to what Columbia's curriculum entailed.
I told them I wanted to work in a magazine like
Rolling Stones, because music was another passion of
mine, and I would love to be a rock photographer.
I was assured that this was a possibility.
The admissions representative also told me that
since the school is very close to my home, I would
be able to save on housing costs, which, she stated,
on average, ran about 60,000 for the duration of the
average American education.
That was also another huge selling point. I
thought I would be saving money. I would be getting
an amazing education that I would have a very high
chance of successful job placement, if I worked
hard.
The admissions representative were extremely
high pressure and played a lot to my insecurities.
I was the first to attend college in my family, and
she asked if I wanted to remain in a low wage
dead-end job forever.
Her tactics worked, and we began the admissions
process. Much of the financial information was sped
through. They told me that I qualified for grants,
and that my mother could take out a pair of PLUS
loans, since my income was too low to qualify for
many of the loans.
We never received any sort of education about
the loans, and we never received counsel about the
way the loans would compound after graduation.
My mother and I did not even realize that we
were taking out multiple loans with high interest
rates, because they never explained that there were
caps to those loan amounts.
Once enrolled, the loans were again quickly
signed without explanation. They would pull you out
of class, already in session, and have you come down
to a window next to the student store, bring you a
piece of paper to authorize your loans to be
transferred to the institution, without actually
explaining that some of these were new loans.
Once enrolled, I started to realize how bad the
decision was. I quickly learned that alumni did not
actually have access to the studios post-graduation,
and we also were not permitted to rent equipment
after graduation, either.
We had to take almost a year and a half of
fundamental courses before even starting the classes
within our major. Once you get to that point,
however, you realize how far you are in and how hard
it is to get out.
The credits from AI do not transfer to most
schools. They have a different accreditation, but
fail to mention that during admissions. I also
learned how oversaturated not only our department,
but the industry was, and realized my job prospects
were not as great as I was led to believe.
I was also unable to transfer out of the school
and go to Columbia once I realized AI was not a real
school, because the credits did not transfer.
There were a wealth of issues within the
photography department. First and foremost, we had
rarely been able to get into the studio for
projects, or even classes, because they enrolled too
many students for an adequate amount of facilities.
The same issue occurred within the equipment
cage, where we rented equipment from. The cameras
were always booked out, and where the lens and
photo-specific lighting, I frequently had to use
static lighting for film in place of photographic
lighting, which contributed to me having low
knowledge of correct photo light equipment.
We're going to wrap it up. Let me get to the
last paragraph. Thank you.
So, she hasn't found work. She hasn't been
able to work in her field. She is still strapped
with a lot of debt.
There is a ton of documented evidence that
implicates a huge fraud scheme. There is more than
enough evidence to implicate entire programs and
schools run by EDMC. We deserve classwide
cancellation of our loans.
It is unacceptable to expect students to
individually file for cancellation when they've been
defrauded. Some students will not even realize they
are eligible for cancellation, which is a travesty
when you consider the fact that their lives are
being held back by insurmountable student loan debt.
I feel this is a way to avoid paying for the
damage that has been inflicted. Cancellations for
entire group of students is needed, and it's the
only answer.
Thank you.
MS. WEISMAN: Did Calvin Anderson arrive?
Tiffany Johnson. Alyssa Picard.
We do not have anyone else scheduled, then,
until 3:45.
Are there others who would like to speak who
have not yet spoken? If there is someone else who
would like to speak, then.
Speak again?
SANDERS FABARES: Yes.
FURTHER SPEAKER COMMENTS BY SANDERS FABARES
SANDERS FABARES: My name is Sanders Fabares,
and I have a story here from another AI graduate,
this one from AI Santa Monica, from, her name is
Sunshine Literas Lamb.
So, hello. My name is Sunshine Literas Lamb,
and here is my version of my time with the Art
Institute. Way back in 1997, the Art Institute
opened its first campus in Santa Monica. We were
told that when the school would be fully set up by
the time our classes started, but this was not the
case.
The first day of class, we saw that the
classrooms were not set up, and we had to assemble
our own computers. In two years, we had three deans
in charge of the school. The first was found to be
stealing money, the second was accused of touching
female students, and the third lasted and promised
to fix issues.
At the time, their idea of job placement
success was The Gap. The career services department
had no idea how to place anyone. Alas, I graduated
with an associate of science.
Years later, when I started to look into
getting a higher education, I was told that to start
from square one. My credits and degree did not
transfer to any other school, and so I was forced to
go back to the Art Institute to be able to even use
them.
Now the campus looked amazing, and the
equipment was new. The Department head I spoke with
at the time assured me that this was a whole new
school, that the entire problem that they had at the
school had been fixed.
I again signed. After my first quarter there,
the department head left the school, and we had a
new one. I started to panic. Every quarter after,
the required class list changed. This happened so
often that it was impossible to graduate on the time
specified.
Not only that, but then you would not be given
a credit for the class that they felt was no longer
needed for your degree you took already.
So, as a result, I was in the finance
department constantly filling out forms and taking
out loans that at the time I thought were grants,
only to find out that I am now in so much debt, I
can no longer pick my phone; over 100K in loans.
In the end, there was no job placement
assistance. Eventually, I had to find my own job.
In the time I was there, I was constantly in the
face of directors about changes and the poor
teaching. I remember even handing out petitions to
students to have an instructor removed.
The amount of fraud that I've witnessed
firsthand and become aware of is absolutely
hysterical, almost beyond belief. My friends were
charged full price for student housing, while
sharing it with three other students who were paying
the same.
I was charged lab fees for online classes I
took from my own home. There were multiple refunds
that were never credited back to my account for
dropped classes.
So, I have 120,000 in debt, $120,000 just to be
told that if I were to remove the school from my
resume, I would have a better chance of finding
industry level work.
MS. WEISMAN: Thank you.
MR. DiPAOLO: Thank you.
MS. WEISMAN: Is there anyone else who would
like to come forward to speak?
Anyone else who would like to return to speak?
FURTHER SPEAKER COMMENTS BY DAWN LUECK
DAWN LUECK: We have more. I'm going to be out
of here soon, because I have a train to catch, so
this might be one of my last ones. So, Dawn Lueck.
This statement is DeAnda Wiley, Pilot Point, Texas.
I attended Everest Online and earned my degree
in paralegal studies in 2011. Like everyone who
goes to college, I wanted a real education and a
fulfilling career.
Everest said they would help me find a job, but
things didn't turn out like they promised. I never
met a fellow student or teacher during my time at
Everest. My education was completely online.
College is supposed to be a place where
students study and learn in supportive and
intellectually stimulating environments. I did not
get that experience at Everest.
Though I studied hard and took my education
seriously, high grades seemed easy to come by. I
began to wonder if the teachers were real, or if I
was getting money -- sorry. Let me start over.
I began to wonder if the teachers were real, or
if getting money out of me was the only real goal.
Now I can't start over at a new school because I
already owe more than I can ever repay. I owe
$76,000 in federal loans, and several thousand more
in high interest rate private debt.
I feel that I was robbed of the education that
I hoped for and that I deserve. The Department of
Education should cancel my debt and the debt of all
Corinthian students. We should also get free
tuition and a real college paid for by the people
who profited from our dreams.
Until our demands are met, I won't pay these
unjust debts.
Thank you.
MR. DiPAOLO: Thank you.
MS. WEISMAN: Is there anyone else who would
like to come forward to speak?
SPEAKER COMMENTS BY SPARKY ABRAHAM
SPARKY ABRAHAM: Hello. My name is Sparky
Abraham. I am an attorney at Housing and Economic
Rights Advocates. I am an Equal Justice Works
Fellow there, sponsored by Pillsbury Winthrop Shaw
Pittman.
You heard from my colleague, Megumi Tsutsui,
earlier today. I think that she gave an overview of
what the organization does, so I will skip that.
I'm here reading on behalf of my client Calvin
Anderson, who unfortunately could not make it today,
but I'm going to read the statement that he put
together.
Good morning, or afternoon, as the case may be.
My name is Calvin Anderson. I am 51 years old, a
veteran of the U.S. Army, and a new father.
I'm testifying today because I was lied to by a
vocational school, misinformed by debt collectors,
and now I owe $45,000 because of an eight week word
processing course I took more than 20 years ago.
The school was Business Computer Training
Institute, or BCTI. I was unemployed in Washington
State, doing day labor. BCTI recruited me, telling
me the fact that I was unemployed meant I would
qualify for grants, and that doing an eight week
word processing course would help me get a
well-paying job.
They did not tell me I was applying for any
loans. They didn't even tell me how much the
program cost; only that grants would cover it.
Contrary to what BCTI told me, I was not able
to get any job afterward, let alone a well-paying
job, after finishing the course. I continued to do
day labor and stayed unemployed.
Approximately a year after I finished the
course, I received a call from a debt collector.
They told me I had to make a payment on my student
loans by the end of that week, or they would go into
default.
I told them I didn't have any loans, but they
insisted that I did. I could not afford to make a
payment at that time, and my loans went into
default.
Over the following years, I was contacted
several times by debt collectors. They never gave
me any options, other than payments I couldn't
afford. They told me I had to consolidate to get
out of default, which I did, but then I couldn't
afford the payments.
I told them multiple times what happened to me,
but no one ever told me about any other options or
discharges. I only found out about student loan
discharges because of what happened with Corinthian.
Once I started researching, I learned that BCTI
had been subject to multiple state enforcement
actions for its unfair and deceptive practices in
Oregon and Washington State, as well as two large
student class action suits that settled for more
than $20 million.
My story was not unique. BCTI had lied to
everyone. My BCTI student debt has now grown to
over $45,000, all for an eight week course. I
rehabilitated my loans, and now I'm making
income-based payments, but it's still very difficult
to afford payments and provide for my family.
I've learned that the loans BCTI signed me up
for were FFEL loans, and that now I owe on the
Direct consolidation loan. I'm testifying here
today to make clear that Corinthian is not the only
problem. I want you to know that this has been
happening to students for years, and that it has
been difficult or impossible until very recently to
get information on what options you have as a former
student.
The Department of Education is aware of this
problem, and has been for a long time, and it has
failed students in its oversight of this industry.
Those failures have resulted in the Department's own
gains and profits at the expense of the students.
The Department of Education should accept
responsibility for its failures.
I want to make the following recommendations,
which, based on my own experience, I think would go
a long way in helping students get relief and
avoiding these problems to begin with:
Full refund if enrollment was procured as the
result of any misrepresentation in advertising
promotional materials of the school, representations
by the owner, or a representative of the school;
Full refund required within a reasonable period
of time in the event of dissolution of the school,
or in the event of any justifiable claims for
refund;
Full refund required if the school has
substantially failed to furnish the training program
agreed upon in the enrollment agreement;
State tuition recovery funds for defrauded
students;
Cooling off periods that give students the
right to cancel contracts with for-profit schools.
It's time for the Secretary of Education to
broaden the student loan discharges through
regulations that protect the student and that
provide relief for all students who have already
suffered harm from schools that lied to their
students and violated the law.
My school lied to me about nearly everything.
They violated state laws. They were shut down
because of their lies, but I'm still here, still
buried in debt, and I'm not alone.
When you're deciding how to handle debt from
schools that violated state laws, whether there
should be limits on what types of loans can be
discharged, or how long students have to apply,
please, remember my story.
I was lied to by my school and then misled by
debt collectors for many years. Please make sure
students like me have options.
Protecting students requires aggressive action
by the Federal Government and states. For too long,
they have ignored the problem. Stakes are high. Do
the right thing.
Thank you for your time.
MS. WEISMAN: Is there anyone else who would
like to come forward to speak?
DAWN LUECK: I just have one more.
MS. WEISMAN: Okay.
FURTHER SPEAKER COMMENTS BY DAWN LUECK
DAWN LUECK: All right, this is it. Dawn
Lueck. I'm speaking on behalf of Andrew Sabourine.
I hope I pronounced that correctly. It's S A B O U
R I N E. He lives in Tamarac, Florida. He attended
the Fort Lauderdale, Florida campus, and I'll tell
you what school in a second. He was at ITT Tech.
During my last week of high school in 2004,
there were ITT Tech recruiters there talking to
people and trying to convince them to check out ITT
Tech's campus in Fort Lauderdale.
I knew all about ITT Tech, as I had seen their
commercials and knew of a few people going there. I
figured since I am a techie kid, I should go and
check it out and see if that's the career path I
really wanted to choose.
A few days after graduating high school, I went
to ITT Tech in Fort Lauderdale, Florida, for a tour.
I was feeling extremely ambitious about furthering
my education, and wanted to start college
immediately.
I could already tell that multimedia was the
path I wanted to choose. I skipped summer break and
decided to continue my education immediately so that
I can keep up to date on current technologies. I
decided to go in for a tour and didn't know that I
would be pressured into signing up for classes on
the spot.
As soon as I walked into the front door at ITT
Tech, someone was waiting for me. It was Terry, the
recruiter from my high school, and I felt pretty
comfortable. Terry acted very cool and down to
earth, like he was my friend, and so I trusted him.
I trusted him to give me all of the information I
needed to make the right decision.
Looking back, everything Terry told me was
either an outrageous lie or a major stretch of the
truth. Being an impressionable 18 year old,
straight out of high school, I looked up to them and
thought that they would have my best interests at
heart.
After touring the school for a bit and
answering a few of my questions about the program,
he brings me to the exam room. It's just a regular
office with cubicles and a computer in it.
They give you 15 to 20 minutes to take a short
test with a bunch of math problems. I've always
been terrible at math and thought I may not have
passed the entrance exam.
To my surprise, Terry came back in and informs
me that I passed the exam. ITT Tech has been known
for passing anyone on the entrance exam, even if
they fail it. They were caught in doing this when
secret shoppers went into the school and purposely
flunked the entrance exam. They passed and were
admitted into the school.
I believe this happened to me, as well. Being
18, and naive, I believed him when he told me I
passed, and I was really excited that I would have
the opportunity to further my education and open my
future to financial security and success.
We entered an extremely uncomfortable high
pressured room where the contracts are to be signed.
I didn't feel pressured or uncomfortable at the
time, because I really didn't know any better, but,
looking back now, at the age of 30, it makes me
cringe.
Terry brought out the paperwork that I would be
signing and tried to explain everything to me. He
does a very poor job of explaining the loan
situation, how much it would cost, and never
mentioned having to take out private loans.
I was just a kid. I didn't know anything about
the loans and interest rates, let alone the insane
terms of the contract. Private loans were never
once mentioned at all in the entire meeting, nor
throughout my entire enrollment there.
All they would tell you is that you needed to
fill out this form in order to continue your
schooling. They tell you that if you do not fill
out the form, you will be pulled out of class and
will not be able to continue.
I thought I was still receiving federal loans,
because I had never heard the word, private loan,
until after I graduated. To read through the entire
contract would take at least a week of studying it,
and a lawyer to interpret it, but they wanted you to
sign with them right there in the office.
They make sure to include an arbitration clause
in the bottom of the contract, stating that you can
never sue ITT Tech for any reason. They tell you
that if you don't sign today, you might miss out on
being admitted to the school, and will have to wait
until the next available semester.
Terry knew at that point that I wanted to start
college as soon as possible after high school, and
he used that against me. He kept asking me if I
really wanted to work at Hot Licks forever, or do I
want a real job.
I signed the papers because I wanted to start
right away. I wanted to get my associate's degree
in multimedia, and a bachelor's in video game
design.
Unfortunately, for me, halfway through the
multimedia course, ITT Tech pulled the video game
design course and no longer offered it. Basically,
I took a bunch of prerequisite courses to prepare me
for a video game design course, but absolutely for
no reason.
I spent countless hours a month of time
learning -- I'm going to skip the classes he
describes. Let me just jump ahead. ITT
Tech response -- let's see.
I had to drop out of the program, because I
couldn't keep up with not having taken the required
prerequisites. ITT Tech's response was, you,
indeed, were taking bridge work associate level
courses to continue to prepare for the bachelor
level ISS program coursework.
I was actually pretty shocked by the response,
because it makes absolutely no sense. Why would I
be taking an associate level course while enrolled
in a bachelor program?
I was taking these classes alongside the
bachelor level courses, so I felt that I was set up
for failure. I won't bore you with all the details.
Let's get to his last paragraph: I didn't get
what I paid for. I didn't get what I was paying for
or what I was promised by ITT Tech. They've been
sued and accused of fraud on multiple occasions,
which has ruined their reputation, and, ultimately,
my degree from them.
Employers don't want to hire someone who
attended such schools, and it doesn't look good on
my resume. Employers see ITT Tech on my resume and
assume I didn't get a proper education, and they
question my choices.
I hope to see some sort of loan forgiveness for
me and the thousands of others for the major damage
they have caused all of us. I'm not alone, and it
can be proven by doing a simple Google search for
ITT Tech reviews. It's hard to find a legitimate
positive review about them.
And I'll just stop there.
Thank you.
MS. WEISMAN: Thank you.
MR. DiPAOLO: Thank you.
MS. WEISMAN: Is there anyone else who would
like to speak at this time?
We do not have another speaker scheduled until
3:45. Would anyone like to consider speaking at
this time?
SANDERS FABARES: All right, I will go again.
It's a good one.
FURTHER SPEAKER COMMENTS BY SANDERS FABARES
SANDERS FABARES: All right. Again, I'm
Sanders Fabares, and this comes from Leanne Moore,
who was a student of AI.
Let me begin by telling you about myself. My
name is Leanne Moore. I was born and raised in
North Carolina, home of the 2012 Democratic National
Convention, and I'm the only child and a spitting
image of my father.
Both my parents are disabled, my dad more so
than my mom. I'm a proud redhead and an avid lover
of Lucille Ball. I'm also a victim of fraud.
I'm a 2007 graduate of the Art Institute of
Charlotte, owned by EDMC. I earned a four year
bachelor of arts degree, with a focus in graphic
design, in three years. Prospective employers have
told me this degree is worthless.
This degree has cost me nearly 200,000 in
college loan debt. These loans have fallen into
default, because I cannot make the 1,000 plus a
month payments.
Since graduation, I've actively tried to find
work in my chosen field. While I've landed some
work, the field is highly competitive and
oversaturated.
At the time of enrollment, I was promised a 96
percent placement in a high paying job in my field
by a recruiter. I'm currently working in a contract
position for a online retailer that pays 800 a month
while I'm trying to gain freelance customers.
This is hardly enough to make ends meet. I am
currently living with my parents, helping to take
care of my dad. My check is already spent on bills
before it's earned.
What little money I have left is to help my
parents out around the house. A few years ago, I
filed for Chapter 7 bankruptcy to try and help ease
the load of my money owed.
While it eased some of the burden, I am now
left with these unforgivable student loans. I'm now
in Chapter 13, after being served papers and
receiving other collection threats. While I
understood Chapter 13 didn't get rid of any of the
debt, it did help make my payments manageable, and
brought me some peace from collectors and the
harassing tactics.
As my lawyer explained to me, severe student
loan debt was forgivable before 1998. Student loan
debt has ruined many lives, like mine, as well as
brought down the national economy. I find this
unfair.
The school I attended was unknowingly a scam.
The for-profit EDMC Company has been sued many times
for fraudulent practices and accepting anyone into
their schools, as long as they could sign their life
away with loans that could not be paid back.
These loans were funded through Sallie Mae,
another company under fire for harassing and
threatening collection tactics. As I mentioned
before, I was lured in with high placement rate by
recruiter I never saw again two weeks after my
classes began.
The school appeared to have a high turnover
rate of recruiters. They never seemed employed very
long. I was pressured to lock in my rate because
spaces were filling fast after my tour.
They played into my insecurities about my not
fitting in a state university and being known as a
number by informing me of small class sizes and the
availability to provide personal attention to each
student.
The school also provided students with a career
services center, a place I frequented, looking for
leads, which ended up being from CareerBuilder,
Craigslist, , and other places which I was
already exploring, until I was told it was my fault
for not having a job, and I was not trying hard
enough.
Towards the end of my time at this business,
classes became crowded, and equipment and programs
became outdated as we were sold top of the line
technology upon recruitment.
Using the computer labs became nearly
impossible. As a student worker, I can verify there
was hardly ever enough equipment to go around for
student use, another promise of my recruiter.
Because of the sneaky practices of EDMC, I am
unable to achieve the American dream. I will never
own a home. I will never enjoy the smell of a new
car. I have suffered undue stress, anxiety, and
depression as a result of this.
As I have come to understand, companies do not
want to hire graduates from the Art Institute due to
the school's persona. To be fair, I did meet some
great friends and faculty members who feel we
students were cheated. The faculty members who
spoke out have since lost their jobs due to supposed
budget cuts.
AI's enrollment is plummeting because of the
campuses to close. They have been removed from
NASDAQ and were steps away from bankruptcy before
being bought out by Goldman Sachs.
In closing, I've become familiar with the work
you've done to help the students who attended
Corinthian schools. While this doesn't affect me
personally, I would like to thank you for your
efforts. I feel this is a stepping stone for some
resolution for my friends and myself.
As you continue your fight for student debt
relief, please take my story and many others like
mine into consideration. Should victims of the Art
Institute become qualified for defense to repayment,
I feel the executives of the for-profit schools,
lenders, and creditors should be held responsible,
instead of Joe and Jane taxpayer having to foot the
bill.
Executives and board members are paid when the
loan is issued and are not required to refund the
money from their coffers if the student leaves
school or defaults on the loan. I feel if it
doesn't create some sort of hurt, a lesson can't be
learned. For-profit institutions are debt factories
that need to be stopped.
Thank you.
MS. WEISMAN: Is there anyone else who would
like to come forward at this time?
We do not have another speaker until 3:45, so,
at this time, if no one else would like to come
forward, we will take a break until 3:45.
(Recess: 2:18 p.m. to 3:47 p.m.)
MS. WEISMAN: Good afternoon. Our 3:45 speaker
is not yet here.
Is there anybody else who would like to speak
as we wait? We will be here until 4:00.
Okay, thank you.
FURTHER SPEAKER COMMENTS BY SANDERS FABARES
SANDERS FABARES: This one is from my wife,
actually, who just sent this. Her name is Jay
Fabares.
MS. WEISMAN: Would you repeat your name again,
as well.
SANDERS FABARES: Yes. I'm Sanders Fabares,
and this is from my wife, Jay Fabares.
My name is Jay Fabares, and I'm a 2006 graduate
of the Art Institute. I was one of the naturally
gifted students who attended AI. I got good grades.
I put in a lot of effort outside of class. I
thought going to AI would then open doors for me.
AI offered six months of assisting in job
placements. I was given links to job boards and
Craigslist postings, stuff I could easily find on my
own. I managed to find small freelance jobs through
Craigslist while working part-time in food service.
I applied to at least 50 plus studios without
help from the school. Any professional will tell
you, it's not the school you went to, it's the
portfolio. If you can do the work, well, I thought
my portfolio would show my potential.
I never heard back from those studios. I have
talent. I went to school. I had good
opportunities. Why can't I find work?
I believe that my school has a reputation of
producing graduates with poor quality work. When
recruiters see AI on my resume, there is already a
stigma of poor quality. There is no contest between
a student who studied at CalArts and one who went to
the Art Institute.
After graduating with 80,000 in debt, I
reworked my portfolio and job hunted during the day
and worked nights in food service. I was doing
everything I could to put myself out there. I went
on many interviews, applying for any position I
could find, just to find a better paying job,
because the grace period to pay the loan was coming
to an end.
My husband and I had fought constantly over our
finances when we had to start paying back our loans.
We fought over loan payments versus health
insurance.
We were often only able to get by on the
charity of friends and family. We never went out
together with our friends. We had a justice of the
peace marriage. Never even had a honeymoon.
We have lived very meager lives. To say that
this debt has been a strain on our relationship and
quality of life is putting it lightly. It's hard
trying to explain to someone who hasn't lived
through this desperation the debt brings.
I wanted to stop trying to find artistic work
and just find anything, anything to pay the bills.
Eventually, I even thought about divorce being an
option to save my husband from my larger debt
burden.
My first fulltime art job came four years
after graduating. I found an ad on Craigslist for
$16 an hour. I'm forever grateful for that first
opportunity, because at that point I was losing hope
in myself as an artist.
Most of the paycheck goes toward paying my
loans, as well as my husband's, this inescapable
feeling of no matter how much I make, it's still not
enough to pay this debt off and live a happy life.
No matter the success that I have found, all I do is
work to pay this debt, and it is barely affecting
it.
Depression has replaced desperation. I
live in constant anxiety for fear of losing my job
that is supporting myself and my husband. I was
always told to go to college to better my future.
This is not the future I had thought going to
college was going to give me.
After learning about others and the
similar school experiences, the lack of training,
the same overwhelming debt, the fraud, the lack of
job placement help, I realized that this was a
bigger problem and issue than what we had.
There are people who attended my school
who didn't have a natural talent, who were brought
in and pushed through to make room for the next
student. This school is a debt factory.
Any credible school has standards for
attending. This school took anyone with a pulse,
fed them false promises of guaranteed job placement
and adequate training.
The for-profit schools have lied and
robbed us of our future. Cancel the debt. This is
not buyer's remorse. This is righting a wrong.
Thank you.
MS. WEISMAN: Thank you.
MR. APPEL: Thank you.
MR. DiPAOLO: Thank you.
MS. WEISMAN: Is there anyone else who would
like to come forward to speak, or to speak again?
We will remain here until 4:00.
We have one last speaker.
FURTHER SPEAKER COMMENTS BY SANDERS FABARES
SANDERS FABARES: I just got this short one in.
My name is Sanders Fabares, and this is a short one
I just got in from Joshua Bailey, who is a graduate
of the Art Institute of Pittsburgh Online.
I enrolled, like most, thinking I would get a
degree at a school that promised to help find good
jobs post-graduation, so, why not, I thought.
Little did I know that once I finished, I'd be
50,000 in debt and only have a minimum wage job that
has absolutely nothing do with my degree.
While in school, I had three instructors that
rather than help me, told me things like, you should
do self-taught learning, as well, Google it, teach
yourself.
And, apparently, this was more than acceptable
by the school. Rather than try to fix the issue of
instructors not teaching online, I was hounded about
furthering my academic career and enrolling in more
classes.
If I had known I'd be literally teaching myself
in every single class I took, just to have an
instructor grade my work and point out what's wrong,
and not what was done well, I'd have told these
people that I wouldn't go there in the first place.
Since graduating, I've been hounded by phone,
e-mail, et cetera, to further my academic career and
enrolling back into the same scam school. I cringe
every time I see one of the multitude of lie filled
commercials and ads now. It makes me sick to my
stomach to know that I fell for their trap, and now
I'm buried up to my neck in debt.
Their joke of a career center that helps you
find jobs consists of a so-called career counselor
sending me e-mails and telling me over the phone to
use sites like Indeed, Monster, , and so on,
to find jobs, and using key words like photography,
photo editing, et cetera.
Who would have ever guessed you'd need to pay
50,000 for some fool on the phone to tell you key
words to use on a job website? What awesome career
placement.
The best part, I complained about how there
were no close jobs around me on these sites, and the
counselor's only feedback or help was to use
different keywords. Now I'm constantly hounded by
student loan forgiveness scam companies that want me
to pay them 600 just to do the paperwork that might
get my student loans reduced and forgiven in 30 to
40 years.
Right now, I simply cannot afford to pay the
600 a month on loans that are based on terrible
education from a predatory, fraudulent school. I
have placed them in forbearance due to economic
hardship, but the interest just continues to grow.
Debt from this fraud needs to be forgiven. The
Department needs to actively work to salvage
students' future trust in the system. If I had one
word to summarize my experience with higher
education, it would be this: Imprisoned.
Thank you.
MS. WEISMAN: Thank you.
MR. DiPAOLO: Thank you.
MS. WEISMAN: At this time, as it is 4:00, I'd
like to thank you for being here for our public
hearing, and to close the hearing out. Remember
that written testimony can be submitted through
, and the comment period does end
today, so, please, get your submissions in by the
end of the day today.
Thank you for being here.
(Time noted: 4:00 p.m.)
I, the undersigned, a Certified Shorthand
Reporter of the State of California, do hereby
certify:
That the foregoing proceedings were taken
before me at the time and place herein set forth;
that any witnesses in the foregoing proceedings,
prior to testifying, were duly sworn; that a record
of the proceedings was made by me using machine
shorthand which was thereafter transcribed under my
direction; that the foregoing transcript is a true
record of the testimony given.
Further, that if the foregoing pertains to the
original transcript of a deposition in a Federal
Case, before completion of the proceedings, review
of the transcript [ ] was [ ] was not requested.
I further certify I am neither financially
interested in the action nor a relative or employee
of any attorney or party to this action.
IN WITNESS WHEREOF, I have this date subscribed
my name.
Dated: 9/28/15
CHRIS TE SELLE
CSR No. 10836
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